What Ecommerce Operations Leaders Need to Know about the Evolving Reverse Logistics Industry (2 of 2)

Part 2: The Future of Reverse Logistics

See here for part 1.

Returns have always been the “ugly stepchild” of ecommerce. We want to sell people things, not help them return them, right…

Wrong! Brands of the future can no longer neglect the reverse logistics funnel and expect to be successful.?

The competition is too tough to let this cost eat at your margin, and the customer of the future is expecting a seamless process.?

So what are you to do?

Your Reverse Logistics Operational Goals

The goal of all technologies and systems being applied in this industry is to:

1. Reduce returns
2. Improve reverse logistics efficiencies (and profitability)
3. Improve customer experience

Think of each of these goals as levers in your business… If you reduce the number of returns needed, you need less in efficiency gains from those returns - think 10% of 1000 returns vs 10% of 100 returns - and you don’t have to worry about as many poor customer experiences. And in many cases, improving efficiency leads to improved customer experience.

So improving A improves B and C, and improving B improves C. So naturally, reducing the number of returns you get every month is priority #1.

Tools like Loop Returns understand this point very well. Here’s Marco De Paulis to explain:

Depending on your return volume and regionality, your goals for streamlining your reverse logistics processes will vary. But every roadmap should include:

1. Customer Experience: Focus on seamless return processes, like boxless, label-free returns, to enhance customer satisfaction.
2. Operational Efficiency: Implement automation and advanced data analytics to streamline return processes, reduce costs, and improve decision-making.
3. Sustainability Initiatives: Integrate re-commerce and recycling options to minimize waste and promote sustainability.
4. Scalability: Ensure that logistics solutions can scale with business growth, particularly in non-local markets.
5. Fraud Prevention: Incorporate robust fraud mitigation strategies, including intelligent software and customer loyalty integration.
6. Cost Management: Track and develop strategies for managing return-related costs, including the possibility of charging for returns.

Reducing Returns with DIY Customer Service?

One of the best ways to reduce returns and improve customer experience is make sure the customer is getting what they want before you ship it to them. Have you ever ordered something online only to realize it's going to the wrong address, or that you had the wrong size or two of something? If you have to submit a support ticket, it could take hours to turn around and fix that order… And it could be hours after the shipment is fulfilled that the order is fixed. DOH!

This is where I have to give a big shout out to Order Editing, a tool that allows customers to edit their own orders, and comes with cool upsells and order hold/management functionality.

Profitable Sustainability Strategies for Reverse Logistics

In the future, product returns will cease being thought of as one linear process for all items, and each package will be more intelligently routed to its optimal location based on usage/viability to resell, location, profit margins, etc.

Here’s Robert Domagala from ReturnBear with how he envisions this to happen:

Additionally, we may even have a world where a product can be resold second-hand without being returned at all. Perhaps the return-ee can simply ship to the next purchaser? The closest purchaser? Here’s Rob with an exciting new feature he’s working on to do exactly that:

Will Consumers Actually Pay for Returns?

We’re now seeing approximately 40% of brands charge consumers for returning a product. And consumers are relatively accepting of this policy. They understand that they may be abusing a free return policy a bit too much and understand that it costs money to handle a return… But what about the idea of pre-paying for a return? As discussed briefly in part 1, here’s a prediction from Marco (and a sneak peak into a new feature from Loop Returns) on the future business model behind returns:

Shortlist of Recent and Future Reverse Logistics Innovations that You Need to Know About

1. Boxless, Label-Free Returns: Innovations like return bars simplify the return process for customers.
2. Warehouse Innovations: Faster return processing with detailed product grading and expanded recommerce opportunities.
3. Smarter Returns: New features that enhance efficiency and reduce return-related costs, including solutions that prevent the need for returns and/or allow the customer to edit orders before fulfilling.
4. Paid Returns: Growing trend of brands charging for returns, potentially shifting to upfront fees.
5. Sustainability: Integrating with recommerce platforms and reducing waste by repurposing (or donating) unsellable products.
6. Holistic Return Management: Full-funnel approaches to reverse logistics, including localized inventory and operational efficiencies.
7. Advanced Data Analytics: Leveraging AI and machine learning to optimize return processes, predict return trends, and enhance decision-making, driving further efficiency and cost reduction.

Final Thoughts on The Next 10 Years of Reverse Logistics ~2024 - 2034

Reverse logistics is nearly a “solved problem.” Meaning that we now have the requisite innovations in technology, the requisite volume thanks to the growth of ecommerce, and the requisite desire from brands to optimize this once neglected stage of the customer (and brand) lifecycle.

Modern brands will thrive by embracing the reverse logistics funnel, optimizing it to reduce costs, reduce waste, and reduce friction, all while improving customer experience. Soon conversations at your next ecom event will be flooded with mentions of recouped inventory and capital, repurposing slightly worn or damaged product, and maybe even peer-to-peer reselling.

Now its your turn, what’s your reverse logistics strategy? What challenges have you and your team faced? Are you bleeding money or printing it? I’d love to hear your thoughts in the comments below.

Movers and Shakers

Last week I met up with Hamish McKay , founder of Order Editing . What a cool tool, it empowers the customer to edit their order and makes it easier for upsells, eliminating customer service tickets, reducing wasted shipping costs, and increasing lifetime value. Brilliant! And yes, it is Pipe17-compatible.

Hamish is building his app in public and posting regularly about his journey on LinkedIn, follow Hamish’s journey here.

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That’s it for ep.9 of The Workflow. What did you like about this newsletter? What’s missing? Send me a message on LinkedIn with your feedback.

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Author: Derric Haynie , Head of Demand Gen, Pipe17