The rise of e-commerce has forced retailers to view their supply chain in reverse. We’re talking about those nagging product returns – or what Forbes calls the “ticking time bomb” of retail.
Advisor Steve Dennis recently wrote that “the mounting cost of returns is a growing and scary problem for many retailers that simply cannot go unchecked much longer. As e-commerce continues to grab share, it’s going to get worse — perhaps considerably — before it gets better.”¹ He also said, “It’s not sustainable. Consider yourself warned.”
Reverse Logistics – Just How Bad Is It?
When it comes to returns, consumers love it, retailers hate it, and we’ve all played a part in creating the monster. Optoro reports that each year, consumers return about $380 billion worth of goods. While brick-and-mortar stores see 5 to 10 percent return rates, e-commerce businesses experience return rates between 18 and 35 percent. After the holidays it naturally gets much worse. In fact, during the first week of January, U.S. consumers will return nearly $30 billion in products, or 9 percent of all e-commerce purchases. That adds up to 5.8 million packages in transit, peaking on January 5, which UPS has nicknamed National Returns Day.
Here’s the challenge.
Retailers know that the rate and cost of returns is a huge issue, yet it’s hard to be the first to pull back the reins. Free shipping and hassle-free returns are not just common – they’re expected. Turning back the clock and reinstating stricter rules will likely sour customer satisfaction and deter shoppers. It’s a tough spot, but there are alternatives.
Taming the Beast – Three Tangible Ways to Fight Reverse Supply Chain
One of the best weapons retailers have in fighting reverse logistics is preventing returns from happening in the first place. Consider the following tangible ways your company can fight reverse supply chain without imposing tighter policies.
#1: Focus on product information.
Presenting accurate, consistent, and compelling product information is so fundamental that if you don’t get this right, it’s virtually game over when it comes to returns.
In a CNN Money article, MIT Senior Lecturer Jonathan Byrnes urges that returns are too often caused by incorrect or inconsistent product details, saying that it’s “all about getting the right product to the right customer.”
A PIM and MDM solution for Retailers provides the essential “single view” of product information required to boost and retain consumer confidence. Furthermore, a Product MDM platform with integrated Digital Asset Management (DAM) helps retailers and manufacturers offer videos and photos so shoppers can more fully grasp the look and feel of products. When shoppers receive items “as expected” they tend to leave positive reviews. This, in turn, helps other shoppers make informed purchases. It’s the domino effect of impactful product content.
#2: Leverage technology to predict product satisfaction and offer personalization.
Multichannel Merchant reports that retailers are increasingly using Augmented Reality, and other emerging tech, to give shoppers a closer look at products during the research and discovery phase. This cuts down on buyer’s remorse, which accounts for 25 percent of online returns. Tools like clothing fit predictors, beauty apps, and “in room” home décor previews are examples of how retailers are allowing consumers to virtually try merchandise for free.
Another way to help limit buyer’s remorse is by offering preference-based recommendations, personalized offers, and configurable products. Shoppers are less likely to make a return when they:
- had a product specifically recommended to them,
- feel like they received an exceptional deal/promotion,
- or played a part in actually “building” the piece.
Plus, retailers have more leeway in limiting returns on made-to-order products. Consumers expect to keep the purchase unless there is a defect or mistake.
#3: Improve the in-store experience.
Yes, you read that right. With e-commerce returns on the rise, the physical store is taking on a new role for retailers. Some digitally-native brands are even starting to open brick-and-mortar locations to curb returns and better serve the customer.
In regards to in-store returns, the savings in cost and waste are significant. First of all, return rates are lower for products purchased in-store because customers get the look and feel before they buy. For the items that do go back, it’s cheaper and simpler for retailers to process the return in the physical store. Plus, consumers often make impulse purchases when they come in.
There are several ways retailers can improve the in-store experience for shoppers (and returners) including:
- Leveraging well-trained store associates to provide personalized product advice and demonstrations.
- Focusing on fulfillment options like pick-up-in-store, ship-to-store, return-to-store, etc. (and make the experience consistently easy for shoppers to navigate).
- Blending channels by offering mobile apps that improve the in-store shopping experience (see how EnterWorks is doing this today with the Storeytelling solution).
Employing methods for fighting reverse supply chain is a compelling case for Retail Master Data Management and PIM – yet it just scratches the surface of how an MDM/PIM platform can impact your business. To dive deeper, download our White Paper: The ROI of PIM and MDM.