Why reverse logistics is still a painful process for e-commerce brands?

E-commerce has changed the shopping experience of consumers forever. Anything a consumer desires can be at their doorstep with just a click and can be returned or exchanged with another. While the process is simple for most of us, the same cannot be said for e-commerce players. 

Delivering a product to the customer’s doorstep might be a cakewalk. The process of reverse logistics is where the complexities begin, putting the e-commerce players through a litmus test. 

As estimated by the industry, almost 30% of products sold via e-commerce platforms are returned for one reason or another, taking up a substantial portion of the supply chain.

According to a study by tech logistics startup LogiNext, an average manufacturer spends between 5% and 20% of revenues on returns. While the customer returns figure varies based on the product category, platform, and customer destination, usually when dealing with segments such as apparel, fashion items, tech, readymade garments, women’s and men’s wear, and footwear a company have to bear higher demands of reverse logistics.

This often comes with complaints of products not being similar to as shown in the image, different sizes, receiving a damaged product, or even simply the customer not liking it in person. 

E-commerce players are left burdened by the process of moving sold products back to the seller through the supply chain, as this drains their resources, does not yield instant financial reward, and even collection agents, often underpaid, hesitate to participate in the process as the experience can be unpleasant. Furthermore, the informal practices in the Indian supply chain and logistics ecosystem births inefficiencies in the process, making it more complex. 

Thus, reverse logistics – a painful process for e-commerce players requires a little extra motivation for execution. 

But when it’s such a hassle, why do e-commerce players offer reverse logistics? 

A Necessary Evil for Business

Although unpleasant for the sellers, product return is one feature that online sellers cannot do away with anymore. 

It has become a way of life for e-commerce platforms, people would hesitate to buy as many goods as they do now if e-commerce platforms do not offer returns. 

The gaps in reverse logistics can cost the seller their goodwill. While the process is taxing, it is also an opportunity to add value to the product so that a better version of the item can be put back on the shelves again.  Ensuring customer satisfaction with reverse logistics, ensuring they received their money back, and taking their comments as feedback and working on them can be beneficial and help pick up sales.

The process-ensuring efficient returns

  • In offering reverse logistics one has to implement an effective and robust returns management policy and process.  A robust policy in place ensures some form of gatekeeping to alert the manufacturer if the returns are genuine. With the help of the quality control (QC) department, a firm can validate genuine claims and avoid pilling up losses. 
  • On top of that, it is necessary to invest in manpower and infrastructure when dealing with reverse logistics. Return authorization — where a retail business initiates the return process — needs to be strengthened with more manpower and infrastructure support. 
  • Refunding the customers has a major impact on the working capital. Therefore, a company should always have a financial cushion for such cases. However, the size of the buffer might vary and depend on different companies and is a strategic decision to be thought of beforehand.