7 Reverse Logistics Problems Impacting Your eCommerce Success

As retailers continue to shift their focus towards sustainable growth, it is becoming increasingly important to optimize business processes. One of the major aspects to consider for sustainable growth is reverse logistics. With an average return rate of 20 - 30%, reverse logistics in eCommerce is a real challenge. 

Taking up this challenge, online retailers have stepped forward by updating their return policies. This means customers that are not satisfied with their orders can return their purchased items through a convenient process. Even if you charge customers for re-delivery, an easy return policy increases your chances of loyalty and positive reviews.

To acheive the best results, you need to use a combination of a great return policy and automation tools that help improve customer satisfaction. By improving the quality of your services and personalizing customer journeys, you get better engagement and are able to overcome reverse logistics challenges.

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What is Reverse Logistics?

The ideal flow of logistics in any business is from materials to products and then to consumable items. Reverse logistics in eCommerce, as the term suggests, is the opposite of that. It refers to the backward flow of a product from a customer to an eCommerce business. It can include disposal, return, recycle, and more. 

Speaking of returned orders, reverse logistics is the backward flow that starts when a customer is dissatisfied with the item they receive. The reasons for returned orders can be anything from the product not turning out to be as seen on the internet, a customer changing their mind, or damages during delivery.

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Reverse Logistics Problems in eCommerce

A reverse logistics flow is something no business is ready for. The goal is to ensure that customers remain satisfied with their orders and come back for future purchases. Here are 7 challenges of managing reverse logistics in the eCommerce sector.

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Problem 1: High Return Rates       

Depending on the industry your eCommerce business falls under, it may be more or less used to high return rates. In case of clothing brands, returning orders is quite common as customers often perceive designs and sizes differently on eCommerce websites. 

Businesses that do not have oversight on category-wise product sales are unable to guage their performance compared to their competitors. As a result, they keep selling products with the same quality of service and never understand why their return rates are so high.

Solution     

In order to reduce return rates, your business needs to ensure that customers get what they really want. This is only possible through next-gen POS software for retailers. With an omnichannel retail operating system, you get real-time insights into customer journeys from all your sales channels. 

Not only that, but the AI-based system also allows you to generate personalized recommendations and makes it more convenient for your customers to find what they need.

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Problem 2: Complex Return Processes 

Depending on the situation your customer chooses to put you in, the reverse logistics process becomes more and more complex. This is because you do not have a set standard to process returned items. Each returned item needs to be inspected and then you have to make the right decision while considering a number of variables. 

Moreover, if a customer chooses to get their items repaired, recycled, or repacked, you have to go through undefined processes. Not only are returned order tough to track but they also interfere with your ongoing logistics, making it a hassle to streamline your business operations. 

Solution   

It’s clear that managing various returned orders is no easy job and cannot be done manually. Even if you hire the right persons for the job, the complications of reverse logistics can cause human error. 

Therfore, you need a technologically advanced automation tool to streamline your reverse logistics flow. The system should be able to handle multiple couriers and also optimize order fulfillment to ensure that your customers are satisfied. 

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Problem 3: Product Damage during Return   

Given that a customer does not like the item they have received and send it back through a courier of their choice, chances are that the product may get damaged. This is a situation where neither the customer nor your business wants to take responsibility for the damage. 

The lack of reverse logistics measures or a defined return policy creates a hassle for the customer and leaves them dissatisfied. As a result, the chances or repeat purchases fall below the ideal threshold. 

Solution  

You need to have an integrated retail management solution in place that allows customers to easily send back an item for exchange, repackaging, or replacement. The system should also enable you to take control of each order and observe its performance. This way, you can make amends where necessary and improve the overall efficiency of the system.

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Problem 4: Inefficient Order & Inventory Management  

In normal logistics, your inventory is optimized to work best with products that are supposed to sell out. However, one of the greatest reverse logistics challenges is an overburdened inventory due to returned items.

At first, retailers do not understand the importance of a return policy. But an overloaded warehouse results in an overhead cost that is greater than what they saved while ignoring the idea of a return policy. Overloaded inventory also results in increased chances of data entry errors that may lead to operational concerns which can lead to bankruptcy.

Solution   

In order to avoid a mismanaged or overloaded inventory, you need to incorporate a modern retail solution with an inventory management system. The system should be able to provide real time data insights about items in stock and also help you reorder products that are required. In addition to that, your inventory management solution should automatically categorize returned items into defected, damaged, or repairable using barcodes. 

Automating your inventory management process with XStak’s OMS allows you to sync inventory and returned orders from all physical and online channels. It tells you which courier is best suited for the return order and also allows customers to track the order through e-mail and SMS alerts. XStak OMS comes with integrations for POS and ERP systems that can come in handy for all your business needs.

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Problem 5: Costly Return Shipping

One of the main concerns of reverse logistics in eCommerce is that it is an expensive affair. If you have had customers from different locations, especially international customers, you know the cost of long-distance deliveries. For this reason, shipping cost is one of the reverse logistics pain points for online businesses.

You need to account for courier charges for redelivery, inspection, processing, and customer support. In fact, the amount can add up to approximately 59% of the sale price of a $50 item. In the case of normal logistics, businesses handle international shipping by creating batches of orders based on location, and sending them together. 

However, reverse logistics makes this impossible as customers will never wait for similar items to be collected before returning their order. It does not make sense as you can never predict how many orders will be returned from a single location in a given time.  

Solution  

By creating a well-formulated return policy, you can define the conditions under which a customer can return their orders. In case these conditions are met, you need to have a retail management system to arrange multiple couriers for customers from different locations at the same time. In essence, a combination of a well-designed return policy and an efficient inventory management system allows you to reduce reverse logistics costs and increase profits.

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Problem 6: Delayed Refunds and Exchanges

Here is a reverse logistics problem that affects customer satisfaction the most. When a customer asks for a refund or exchange for legitimate reasons, delaying the process is not favorable for your business. 

Delays in refunds and exchanges may arise due to extra time taken up by courier services, but at the end of the day, it stains your business reputation. Also, in case where the request for refund or exchange is not valid, you need to ensure a swift mechanism to get the product back on the market.

Solution

Clearly, delayed refunds and exchanges are a concern that needs to be addressed by the retailer’s end. With modern-day retail solutions like XStak’s OMS, famous retailers and clothing brands in Asia and the Middle East have streamlined their refunds and exchange processes. 

Knowing how many return orders you are getting and which processes need to be followed, you can accelerate your operations for good. After all, delivering the right products to customers within due time is the common goal of all eCommerce businesses.

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Problem 7: Inadequate Data Analysis

With online shopping becoming the go-to method for the majority of customers, retailers get a large volume of purchases. Today’s customers are not only conscious about their shopping habits but also try to extract maximum benefits from what they can buy. For instance, a given customer makes repeat purchases and always pays big bucks. But without data analytics, you might never know that the same customer also returns a lot of items. 

According to statistics, 19% of shoppers admit purchasing similar products and making up their minds when they receive the delivery. This practice not only causes concerns for your business by increasing return rates but also damages the environment with wastage. 

Solution   

Having real-time data insights about customers’ purchasing behavior and their reverse logistics records allows you to make better business decisions. Using XStak’s distributed order and inventory management system, you can automate data synchronization between multiple online and offline channels. 

As a result, you can identify individual orders and corresponding customers to determine their purchasing behaviours. Then, you can offer your customers multiple ways to shop, such as buy online, pick-up in store, to ensure that they are satisfied with their purchase.

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Wrapping Up

As the dependency on eCommerce and online shopping increases, customers are becoming more and more choosy. Regardless of your business model or the industry you operate in, today’s eCommerce landscape demands awareness of reverse logistics challenges. 

Even when you are not getting any returns, it pays to improve your business structure with a robust return policy in place. Combining that with a modern omnichannel retail solution takes your business to new heights.