Cracking Returns To Origin: The Journey of Failed Deliveries from Warehouse to Door, and Back

In the fast-growing arena of Indian e-commerce, which now expands beyond established online marketplaces to include vertical commerce, D2C (direct-to-consumer), and social commerce brands, Return to Origin (RTO) has emerged as a significant challenge. With over 60% to 65% of e-commerce orders being Cash on Delivery (COD), RTO in India accounts for 40% to 50% of the shipments, highlighting the severity of the issue. 

In a world where customer satisfaction is paramount, the problem is “you can’t live with it or without it.” These undelivered items returned to the seller pose a serious issue for the industry, affecting costs, inventory management, and overall supply chain efficiency.

RTOs impose substantial costs on e-commerce businesses. Each undelivered item incurs both forward and return freight costs. For example, if the forward freight costs INR 100, the return freight might add another INR 45–INR 50. These additional expenses can quickly accumulate, especially for D2C brands and new market entrants, significantly impacting their profitability.

RTOs also disrupt inventory management and logistics in the following ways

  • Delayed Returns: Products stuck in transit during RTO are unavailable for resale, tying up valuable inventory.
  • Product Damage: Prolonged return processes increase the risk of product damage, potentially leading to inventory loss.
  • Stock Availability: Items in return transit cannot be sold, affecting stock levels and availability for other customers.

To combat RTO, many companies are turning to technology. AI-based address correction, used by companies like Ecom Express and Delhivery, helps reduce delivery failures by correcting incorrect addresses at the source.

Plus, analyzing historical data on order acceptance and cancellation allows businesses to predict the likelihood of an order being canceled, helping them identify high-risk transactions and take preventive measures such as requiring a part payment or manually confirming the order.

Effective coordination between logistics companies and e-commerce platforms is also crucial, with improved communication channels aiding in reducing RTOs.

It should be noted that logistics companies are contractually obligated to make three delivery attempts before marking an order as RTO, and ensuring these attempts are well-coordinated and timely can significantly reduce RTO instances.

Several operational improvements also help mitigate RTOs: ensuring timely delivery reduces the chances of customers rejecting the order, while frequent and high-quality contact with customers during the delivery process can minimize misunderstandings and delivery refusals. An OTP-based refusal system allows customers to refuse delivery via an OTP, streamlining the return process and reducing unnecessary RTOs.

While reducing RTO is essential, it’s also crucial to maintain customer convenience and satisfaction. Policies must be flexible enough to accommodate genuine customer issues without excessively penalizing them. Companies need to strike a fine balance between minimizing RTOs and preserving customer-friendly practices.

COD and easy returns have driven the explosive growth of e-commerce in India. As long as COD remains a dominant payment method, RTOs will continue to pose a challenge. By leveraging technology, improving coordination, and enhancing customer communication, e-commerce companies can significantly reduce the impact of RTOs on their supply chains, ultimately leading to a more efficient and profitable operation.

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