How Do Companies Handle Holiday Returns?
Have you ever wondered how your unwanted Christmas goodies make their way back to the store? How does the process for holiday returns work? And what’s the impact on consumers and businesses from holiday returns look like?
In this blog post, we are going to take a much deeper look at these questions and shed some light on how large companies handle all those post-holiday returns!
What is Returns Processing?
Returns processing is essentially just reverse logistics. Rather than getting an item from a store’s warehouse (or centralized location) to a customer’s home, it’s going backward from the customer to the store.
In theory, the process should be about the same (just in reverse). But it’s actually quite different—and a lot more complicated. It’s not just turning the truck around.
Unlike “forwards” logistics, there isn’t a set route for the return. Rather than a whole pallet or truckload of goods moving in the same direction, you have a single item trying to find its way back to a proper home.
With the use of transportation management systems, carriers can find the most optimized route for the product to get to the appropriate warehouse—but it could end up in a lot of warehouses, on a lot of trucks, and in a lot of hands along the process. The returns process can be very complicated, especially if companies and carriers don’t have defined systems in place to handle these returns.
The Importance of the Returns Process
Companies are always focused on sales: what’s leaving their warehouse and generating revenue? Too often they neglect one of the most important parts of their revenue and the supply chain process: the return.
Returns not only eat into the revenue you’re generating, but they can actually lose money as well. From shipping costs to loss and damages to restocking expenses, one small mishap along the returns process can create massive losses. In fact, sometimes the cost of restocking and reselling returned items actually exceeds the value of those items, so retailers cut their losses by selling returns to third parties.
Not only might a company lose money on the return, but a poor returns process could lose customers as well. Customers expect an easy returns process.
If a customer runs into a lot of friction with their return, they’re not likely to buy from that store again.
What is the Impact of Returns?
There are three major logistical impacts that holiday returns, and really any returns, in general, can generate.
First, businesses and/or consumers are absorbing the cost of shipping for an item that doesn’t even make money or get used. If the business pays for shipping, they’re now “out” two-way shipping on an item that was refunded. If the customer pays, they’re losing money on a product they’re not even using. Money is essentially going into the abyss without actually making any revenue.
Second, there’s also an effect on the environment. Returns create double (or more) of the environmental impact in terms of fuel, packaging, and carbon emissions.
Third, we’re still in a bit of a trucking crisis. Although the crisis isn’t as bad as it has been in previous months, there’s still a shortage of drivers and trucks—and an increase in rates. A shortage means that returns are taking up more room on trucks—even though they’re not going to be producing any revenue or making a customer happy.
Returns have some negative impacts on the economy and environment. But there’s not much we can do with these except to educate consumers. Customers like having the freedom to return items they don’t want, and businesses aren’t willing to risk alienating customers by tightening return policies all that much.
So, it’s important to be aware of the influence of returns… but it’s even more important to plan for them in your business.
How can Businesses Leverage Returns?
There’s a pretty hefty price of returns. But that doesn’t mean returns are the devil. Businesses, both small and large, can optimize their returns process to delight their customers even more.
Here’s how some companies are making the returns process an opportunity for their organization.
Customers love free returns. According to Dotcom Distribution, 90% of customers highly value free returns, and 62% would buy again if a brand offered free returns or exchanges.
But that means the business is paying for the return. The retailer typically offers prepaid packing slips, and they’re charged when the return is scanned at a shipper. So companies end up losing money to pay for return shipping, restocking costs, and potential damages—as well as the loss of the sale itself.
For some companies, it’s worth it, though. Major retailers are finding that they’re willing to take the hit for some returns in order to instill a level of customer service that leads to repeat purchases and lifelong clients.
Automating the returns process (especially for inventory management and reimbursement) means your customers can get their return credit faster, which makes them a lot happier. The faster you can process a return, the faster you can make your customers happy.
Make the returns process a part of your customer service. See how you can delight them even more by making the process simple, easy, and effective for them. If you can stay on-brand during a return, a customer will be glad to purchase from you again.
(On the other hand, if the returns process has a lot of friction, they’ll get a bad taste in their mouth and they’re unlikely to purchase from you again. They don’t want to take the “risk” on a product if they can’t return it, especially for e-commerce brands.)
Remember: The return experience is just as important as the initial sales experience.
Buy Online, Return in Store
If you have an omnichannel store, make it easy and streamlined for customers to return their e-commerce purchases in-store. Not only does this possibly reduce the customer’s stress of having to bring the item back to a shipping center, but it also means you already have the product in-store to resell. You likely don’t have to worry about moving that item around, so you can save a lot less on shipping and restocking.
Partner With a Shipper
A lot of retailers don’t have efficient or effective return strategies in place yet (even though e-commerce is king). Returns are especially challenging for small to mid-size retailers who are expanding their offerings and looking to enhance their returns service for customers (in order to compete).
Partnering with a logistics partner is one of the best ways to take the stress of holiday returns off of your team, and hand it over to a pro in the field.
Redwood Logistics offers flexible freight management systems, so it’s easier than ever to leverage reverse logistics as a “win” for your business.
Want to streamline and simplify your returns process—so you can focus on the customer and less on the transport? Our solutions are flexible, affordable, and driven by innovation.
Contact us for a free consultation about your logistics and reverse logistics needs.