Bringing It Back Retailers Need a Synchronized Reverse Logistics

Bringing it back Retailers need a synchronized reverse logistics strategy Brochure / report title goes here | Section title goes here Bringing it back | Retailers need a synchronized reverse logistics strategy Introduction In our continuing series of white papers around the vast impacts to the supply chain of the evolving retail industry, this white paper will follow our previous two editions, which focused on leveraging urban fulfillment centers and the pressure retailers face to establish a customer-driven supply chain. This edition will focus on the need for a synchronized reverse logistics strategy to proactively manage the challenges e-commerce growth brings to outdated reverse logistics processes and methodologies. 02 03 Bringing it back | Retailers need a synchronized reverse logistics strategy Bringing it back | Retailers need a synchronized reverse logistics strategy With e-commerce revenues growing 15 First, returns are becoming one of Online returns are often the result percent annually and a product return rate the greatest supply chain challenges of digital challenges such as poorly near 30 percent of sales, we can expect 4 companies face today, with reverse logistics displayed images and incorrect fit. billion incremental units to be added to the strategy critical to maintaining healthy Items never quite look the same “in person” Bringing it all back annual reverse logistics pipeline by 2022. inventory turn and operating expenses. as they do in pictures: colors and textures tend to appear differently in the flesh. And returns are expected to grow. If current Secondly, understanding the dynamics Fit is another thorny issue: variances in What’s behind the surge of returns? industry forecasts hold steady, by 2022, behind how, when, and why customers manufacturer sizing contribute to over Simply stated: E-commerce. retailers can expect 13 billion units worth return items is critical to understanding 50 percent of customers returning $573 billion2 to be returned annually. their purchasing behavior and improving items due to product size or fit.3 That’s four times the total e-commerce their overall experience. Every product sales in 2008! return is a chance to learn more about the customer, drive the next sale, and The rise of e-commerce over the past unique to e-commerce, result in an online Why should retailers be thinking about make it stick. decade has driven a 33 percent increase purchase being returned three times more returns? in the return rate of overall retail sales.1 often than a purchase made in a brick-and- Digital challenges, consumer behaviors, as mortar store. well as emerging business models that are 5% Item was defective Retail sales Return rate 5% Not as described Top reasons that customers $6,000 10% return an item purchased online 9% 8% $5,000 Style not as expected 8% 7% $4,000 12% Changed mind 6% $3,000 5% 52% Size too small or large 4% $2,000 3% 2% $1,000 The increase in online shopping has also they would bring multiple items into the 1% contributed to a new consumer behavior fitting room if they were in a store. The known as bracketing. Bracketing occurs customer’s intent at the point of purchase $0 0% when the customer orders multiple items is to return any items they don’t like or that 2008 2010 2012 2014 2016 2018 2020* 2022* online to try on at home in the same way don’t fit. US Retail Sales excluding food services (billions) Brick-and-mortar sales * estimated E-commerce sales 48% 46% Total returns 42% Top merchandise types for Return rate bracketing show the customer’s 27% intent to try on at-home versus 24% in-store and the prevalence for this phenomenon to occur with fashion items Apparel Shoes Home Consumer Other products electronics 04 05 Bringing it back | Retailers need a synchronized reverse logistics strategy Bringing it back | Retailers need a synchronized reverse logistics strategy Additionally, emerging retail models, such But to seize these opportunities, retailers Not able to return to store 22% Return policy elements that would deter as curated shopping, rentals, and try-on must transform siloed return policies and a customer from making a purchase services, are compounding e-commerce processes into a holistic returns strategy. Require return authorization 25% return volumes. Companies like Stitch That transformation means knowing when, Fix, Rent the Runway, and Warby Parker how, and why customers make returns Short time limit for return 51% are conditioning the customer to make and applying smarter insights throughout Return shipping fees returns, as each of their models is built on the reverse logistics supply chain. It also 74% the concept that some, or all of the items requires taking returns into consideration Restocking fees ordered, will come back. For many retailers, at the point that merchandise orders are 83% this concept creates a behavior for which the placed, and collaborating with suppliers on supply chain is not currently designed. product and assortment choices that will drive down return rates. return an item from the point of purchase. • How much time do you want to let your C. Return options can save a sale Fast fashion, off-price, and resale companies customers have to make returns? Retailers must make sure that they embrace Traditional focus area result in siloed policies and processes with the best inventory turn rates require the return and not miss the big picture— • Who pays the cost of a return in the case faster returns—on average, within 25 days that returns represent another opportunity of a mailed return—the consumer or the of purchase.5 to engage the customer. Rather than company? representing a failed sale, return options Although customers prefer free return • Do the cost and time allowed for returns can save the sale and lead to further sales, Supplier Return Return Logistics Merchandise Returns delivery, it isn’t an industry norm yet. During align with customer expectations and the as evidenced by the fact that collaboration policies options processes disposition analytics 96 percent the 2018 holiday season, more than half of competitive landscape? of consumers would shop again with the retailers reviewed by Deloitte required a retailer based on a good returns Merchancise Time and credit Methods offered to Store and Determining if Understanding • Should return time extensions and free assortments and terms offered to customers to make warehouse products should return drivers and customers to pay to use a return mailing experience.7 Moreover, every return can delivery be reserved for best customers? allowances to customers and returns in person applications and be returned to costs incurred label or required customers to make their be leveraged as an opportunity for a address product special product or through the mail transportation to stock or require throughout the 6 returns restrictions final destination liquidation product lifesycle own return delivery arrangements. • What are the best return options to offer customer to replace the item or buy based on cost and customer preferences additional items. Free returns are most frequently offered (in-store vs. mailed, refund vs. credit, by pure-play e-tailers, but even that model prepaid labels provided vs. customer Fifty-five percent of 21- to 29-year-olds prefer Applying smarter insights throughout the entire pipeline achieves a cohesive reverse logistics strategy is changing. Online companies with no or arrangements)? in-store returns, and 48 percent agree that limited physical presence can now offer online returns are a hassle.8 Our research customers a free “walk-in” return option These decisions depend on the company. suggests the main reason they are returning through partnership with brick-and-mortar But to make the right decisions, a better purchases to the store is they want their To better understand what a returns strategy the Brand President and supply chain under B. Return policies and the customer retailers (Kohl’s and Walgreens) or through understanding of the underlying data is credit immediately, rather than waiting should look like, we will look at the reverse the COO, so they are not even in the same experience third-party services (FedEx and UPS Stores). paramount. 10 to 14 days for a mailed return. logistics value chain and key components organizations, which does not allow for When is the last time you reevaluated your that embody a reverse strategy: collaboration to understand the total cost of return policy to make sure it is competitive Such cross-channel partnerships are adding A. Supplier collaboration that supplier agreement. and aligned with your business strategy? increasing complexity for retailers to not 66% Return options offered by B. Return policies Why? only process their own, but also partners’ companies during the C. Return options From the outset, even before the purchase returns at stores to increase foot traffic. In holiday 2018 season D. Logistics processes is made, merchants, suppliers, and sellers Returns are increasingly a part of the overall a 2018 study by Earnest Research, Kohl’s 48% E. Merchandise disposition need to be discussing how they will share customer experience, and 67 percent has seen Chicago sales and transactions, F. Return analytics ownership for returned products and of consumers check the return policy and customer growth, all outpace the building that ownership into the buying before purchasing an item.4 For example, same metrics nationwide for 2018 after the A. It all starts with supplier agreement. Accountability lies at the heart 74 percent of people will be deterred stores began taking Amazon returns. The 24% 20% collaboration of returns, and suppliers should be sharing from making a purchase due to returns same study also measured new Chicago- In many siloed returns processes, we find that responsibility with their retail partners.

Load more