Whether you’re a retailer or a courier company in the Philippines, you have probably experienced the returns of your products numerous times already. Such an increase in return requests has been attributed to the ever-changing customer expectations and the emergence of customer-friendly return policies.
All of these procedures associated with product returns, repairs, maintenance are referred to as reverse logistics. This in contrast to the forward-moving process which businesses usually expect with the end goal of getting the product fulfilled to the customer. As such, it is a complicated and expensive step in the sales process.
Fortunately, simply understanding reverse logistics and finding ways to improve it can leave a positive impression on your customers. To guide you, here are all the important facts you need to know about reverse logistics.
The Complete Guide to Reverse Logistics
What is Reverse Logistics?
Reverse logistics simply refers to the “reverse” movement of products from the customer back to the manufacturer or merchant, or even back into raw materials through recycling, after the sale.
Traditional Logistics vs Reverse Logistics: What’s the Difference?
No retailer would want their products to end up returning back to them. As such, they always optimize their sales system in a way that their goods would land their way straight to the customers’ hands. The ultimate goal is always to get it right for the first time. However, this doesn’t always happen, thus the need for reverse logistics.
Reverse logistics involves moving products from their typical final destination for the purpose of recapturing value or proper disposal. Traditional logistics, on the other hand, manages the forward movement of goods to the consumer. In short, end products must get into the homes or places of every customer.
During traditional logistics, the value of the product increases as it passes through each step along its route to the end-user. The rate of this movement is dictated by customer demand. As such, products must be kept at each stage in order to meet variances in that demand.
In contrast, a product’s value depreciates as soon as it enters the reverse logistics process. The speed of the item’s return to the distribution center would depend on the supply instead of demand. This is due to the fact that many product returns can make them busier and faster, but a lack of product returns can make the logistics stop entirely. Overall, reverse logistics is costly and time-consuming for any company.
Why is Reverse Logistics Important?
According to statistics, the return of goods brought in stores amount to 9% while online product purchases comprise at least 30%. Many businesses consider such returns as a bane for success.
However, some companies that implement the proper reverse logistics solutions can actually reap several benefits. In fact, it was stated in the same survey that 92% of consumers will buy again if the product return process is easy. Here are other reasons why effective reverse logistics is important.
• Ensure Customer Retention
When a customer returns a particular product, make extra efforts to make their experience delightful instead of snubbing them. This is the most crucial as it’s the point where the buyer decides whether he/she is going to come back or not.
Customers are more likely to choose your brand over competitors when you have a hassle-free reverse logistics process. This allows them to return the products with little to no hurdle.
• Enjoy a Return on Investment
While reverse logistics can surely cost your company, it doesn’t mean that profits couldn’t be made.
In fact, you can still get a good return on your investment. 40% of buyers made an additional purchase while processing the return on the website, according to statistics.
It may take a lot of time to process but if you make returns easy and comfortable for your customers, you can expect significant profit.
• Gain Strategic Advantage
You can easily attract a potential consumer by having a robust reverse logistics process. If he/she sees that you have a straightforward return process compared to the competitor, he/she is more likely to purchase from your store.
• Pinpoint High-Risk Products
Reverse logistics can actually help you identify the products that are no longer doing well and are at high-risk for significant returns.
• Identify High-Risk Buyers
Aside from pinpointing problematic products, reverse logistics can also help you determine the particular demographic that is most likely to return your goods. This can be easily done by segmenting customer info and their feedback.
These insights can then be passed onto your marketing team so they can come up with better strategies to target this demographic.
Top 13 Reasons Why Reverse Logistics Happen
While brick-and-mortar stores can easily put up a board stating “no returns allowed,” online retailers cannot do such. As such, it’s important to understand the reasons why consumers return your products in order to better cater to them in the future.
Product Returns by Customer
Some products are inevitably returned to the retailer or manufacturer by the customers due to the following reasons:
- Incorrect product or product size ordered – Unlike physical stores where one can physically see and try the product, online products can only be photographed and displayed on the website.
- Fail to match customer expectations – Since customers cannot physically assess the product prior to the purchase, there’s a chance that he/she would be disappointed.
- Customer no longer needs the product – There would be instances when the customer decided that he/she no longer needs the product.
- Damaged product – When the product is damaged upon arrival, a customer would usually request for a return.
- Malfunctioning product – When a product fails to function properly as promised by the retailer, the customer would immediately want to return it.
- Cancellation of order – Sometimes, customers would cancel their orders at the last minute. By this time, retailers and manufacturers have probably forwarded the product to a courier company.
- Wardrobing – Customers sometimes engage in wardrobing—he or she buys a product, use it then attempt to return it for a full refund.
Product Returns by Carrier
However, there are also instances when the product is in excellent condition and meets the customers’ expectations but still ends up in the reverse logistics process.
Here are the reasons why the product is not reaching the customer at all which leads to the carrier returning it to the retailer.
- Wrong or incomplete address – This reason for return is actually common. When the customer gave an incorrect address, the courier company would not be able to successfully deliver the product.
- Customer is not available – When a courier company delivers the product, there would be instances when the customer is not at the location. Thus, the courier is forced to delay or return the package.
- Customer refused to accept – Customers can open the package once it was delivered but immediately refuses it and returns it to the delivery person.
- Dispute in amount – Reverse logistics can happen if there was some kind of amount dispute between the delivery person and customer. This usually happens in the case of cash-on-delivery (COD) orders.
- Misdelivered products – Returns can sometimes be the courier company’s entire fault when the delivery personnel fails to deliver the correct products.
- Fake delivery attempt – For whatever personal reasons, the delivery person can give the fake comment that he has already delivered the items but that’s not always the case.
4 Major Challenges of Reverse Logistics
Return rates are expected to grow exponentially as shifts in customer behavior and demand continue to persist. These obviously present several challenges that fall largely on retailers.
Traditional (forward) logistics start in one destination to end up in different locations. In contrast, reverse logistics begin from many places and lead to one destination.
Companies who experienced reverse logistics find it difficult to forecast budget, revenue, and logistics. In short, this unpredictability is creating hinder for retailers and manufacturers.
Once a product is returned, it will take some time for it to be on sale again, especially in cases of malfunctioning or damaged goods.
This is due to the fact that the return process is lengthy. For instance, products need to be picked up, inspected, delivered, fixed, and restored before going on sale again. In some cases, products may even lose their value because of damage or worse, they end up in the trash.
Conditioning items for resale is one of the most difficult tasks in the reverse logistics process. You can spend a lot of time and effort processing the return which ultimately affects your revenue.
4. Lack of Optimal Policies
To avoid the rise of return rates, some companies have implemented strict measures for their return policies. However, there’s a big difference between having a strict policy and a clear return policy.
Having a strict return policy can negatively impact customer loyalty while clear, flexible regulations can drive customer loyalty and retention.
4 Solutions for Effective Reverse Logistics Management
Fortunately, the aforementioned challenges can be solved by having an understanding of all the elements of reverse logistics. Here are the strategies retailers and manufacturers can implement in order to effectively handle the returns process.
1. Have a Clear Return Policy
You need to craft a clear return policy in order to encourage customers to buy from your store without hampering your overall profits. This can have an overall impact on your sales, brand image, and most importantly, perception in the mind of potential consumers.
Tip: Aside from having a clear return policy, it’s best to confirm the delivery address of consumers first before delivering your products. This can significantly increase your first-time delivery success rate.
2. Be Strict
While making returns hassle-free for your customers should be your number one priority, make sure that you’re not making it too easy for them to do so. Once you do, you’ll be surely seeing a significant increase in your return rates.
To avoid this, design your return policies in a way that the customer can mention the exact reason for the return. If possible, ask for the courier address and barcode to quickly identify the package. It’s also important to set a time period for such returns, whether it’s 7 or 30 days after the delivery.
Make sure to put down clear and strict return policies but not to the point that will drive customers away.
3. Simplify Credit Reconciliation
By now, you’re probably familiar that reverse logistics are not always standard transactions. As a result, credit processes can be tricky and lengthy at times.
To make it easier for everyone involved, make sure the credit approvals are simple. If the return passes the policy, you can pay for the shipping charge. Otherwise, you should deduct it from the customer’s credit.
Lastly, keep your customer informed about how long it is going to process the refund. Even if they are returning your product, try to keep the overall experience as smooth as possible for your customers to encourage them to come back.
4. Sort Returns
Know that reverse logistics is caused by various reasons. Once you get the returned products back, it’s best to sort them according to its conditions, whether it is saleable, unsaleable, damaged, or repairs. This would ultimately help you manage returned products efficiently.
Every retailer or manufacturer wants their products to land straight to their consumers’ hands. However, this is not always the case as customers can return goods for various reasons. All of these procedures associated with product returns, repairs, maintenance are collectively called reverse logistics. It presents itself as a challenge for many businesses but it can be easily managed by fully understanding the return process.
Want to learn more about reverse logistics? Feel free to ask the experts at Worklink Services Inc., one of the leading B2B courier companies in the Philippines. We have been providing logistics management solutions to various domestic industries for over 20 years. Contact us today for inquiries!
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