E-commerce has cemented its place in the consumer buying process, driving up the number and variety of orders making their way through warehouses and fulfillment centers each day. A rising tide of returns has accompanied that growth in recent years, pushing what was once an afterthought in many facilities to a place of prominence—and forcing retailers, brands, and logistics service providers to get smarter about the way they handle reverse logistics. It’s been a long time coming, but returns specialists say retailers and their logistics partners are finally focused on optimizing all things returns-related.
“I do think [companies] are getting better [at managing returns],” says Tara Daly, senior director of product marketing at Loop Returns, a provider of returns management software (RMS) for retailers and consumer packaged goods (CPG) companies. “It’s the realization that the post-purchase experience is equally as important as the pre-purchasing journey. It’s clear now: We know that [the returns process] needs to be optimized. Also, [third-party logistics service providers] and warehouses are getting more sophisticated in terms of their returns operations and not being only focused on outbound.”
Daly says she expects a steady or slightly lower volume of returns this post-holiday season compared to last year based on Loop’s own data, adding that the RMS provider has recently seen a year-over-year reduction in returns rates among its customers. She attributes some of the progress to strategies the industry is adopting, collectively, to reduce returns. She and others point to retailers’ efforts to create better returns policies through industry partnerships as well as the implementation of automation strategies at all points along the supply chain as important steps in the evolution of reverse logistics.
“It’s fair to say the industry is making inroads in finding efficiencies on reverse logistics,” adds Brendan Heegan, founder and CEO of Boxzooka, a third-party logistics service provider (3PL) that handles warehousing, storage, inventory management, shipping, and reverse logistics for retailers, wholesalers, and subscription-box providers, most of which are in the high-end apparel and CPG industries. “We look at returns just as seriously as the outbound side; it’s not an afterthought for us. [That’s] because returns are important; it can be lost revenue for customers if they’re not dealt with [in a timely manner] and with care.”
BUILDING BETTER PRACTICES AND POLICIES
Like Daly, Heegan believes that broad-based industry strategy is a major part of today’s returns revolution—and he points to UPS’s recent acquisition of software and reverse logistics specialist Happy Returns as an example. UPS announced plans to acquire Happy Returns last October, and the deal was expected to be completed during the fourth quarter. Heegan says the deal is akin to FedEx’s purchase of Kinko’s (now FedEx Office) 20 years ago and Amazon’s purchase of Whole Foods in 2017—moves that expanded each company’s network of parcel collection locations. The UPS/Happy Returns deal adds 10,000 return dropoff points—known as “return bars”—to the UPS network.
“This acquisition … is another example of things the industry has been doing to increase the number of retail dropoff points, and that gives them consolidation opportunities,” explains Heegan. “At the end of the day, if a UPS truck has to go to someone’s home to pick up a return package, that’s going to cost UPS more by having to drive, burn the gas, and spend the time and labor for one pickup point. If we can get consumers to rally together and drop off returns at one location, then you’re gaining efficiency because now the UPS drivers can go pick up 20, 30, 100 packages at one location.”
It’s also a win for companies like Boxzooka, which has a handful of customers that already use Happy Returns as part of their efforts to provide a better returns experience for shoppers. The company’s reverse logistics services include identifying, re-barcoding, quality control, restocking, and disposition of returned items. A client using Happy Returns helps streamline that process by providing consolidated returns delivered directly to Boxzooka’s facilities. An added bonus: Happy Returns removes all packaging and consolidates merchandise into reusable totes, saving Boxzooka the trouble of dealing with all the excess paper and cardboard.
Such efforts reinforce the value of a seamless returns policy among consumers. According to 2023 research from Loop, 98% of consumers agree that if a retailer provides a fast, convenient, and “hassle-free” returns experience, they’ll be more likely to shop with that merchant in the future.
But consolidation via “return bars” isn’t the only strategy contributing to a better reverse logistics environment these days. Both Heegan and Daly say retailers are more focused on efforts to avoid returns altogether. First and foremost, they say, merchants have been working to improve the online buying experience by providing much more information about products than they did in the past—with better website graphics and size charts, and the addition of customer reviews. They’re also analyzing their returns data, much of which can be aggregated in an RMS. Daly offers an example: With access to all of their returns data, merchants can identify patterns—a dress that keeps getting returned because it’s too small, for instance—and then take steps to correct the issue at the manufacturing stage. All of these efforts can help reduce the need for customers to initiate a return in the first place.
Daly and Heegan say the era of free online returns is largely over as well. Merchants are beginning to strategically apply fees, in some cases offering free exchanges but charging for returns.
“Brands need to focus on [providing] the best experience possible,” says Daly. “And they realize there is an opportunity to drive more revenue—an exchange rather than a return, for example. Merchants are starting to realize that this is an opportunity for them to unlock and increase their profits.”
IMPLEMENTING TECHNOLOGY SOLUTIONS
Automation strategies are proving to be a game-changer as well. More retailers are implementing RMS solutions as a first step toward taming returns because it helps them get control over the entire process, Daly explains. Software systems like Loop’s eliminate the manual, time-consuming process of initiating and managing returns—some estimates say a return can take up to 50 minutes when handled manually—by allowing customers to start a return or exchange anytime via an online platform. In Loop’s case, Daly says the platform can be tailored to automate any existing returns process and also can be integrated into the retailer’s back-end technology tools. Among other advantages, this frees up associates to focus on more-profitable activities, she explains.
Data backs this up: Nearly 80% of merchants surveyed last year by Happy Returns said they have had to choose between shipping new orders and processing returns due to limited warehouse resources. Automation helps solve that problem.
Heegan also considers automation essential to efficient returns management. He notes that Boxzooka, which has focused on returns since its inception in 2014, built its warehouse management software (WMS) with reverse logistics in mind, realizing from the start that “returns have been an ugly part of the 3PL business.
“Consumers can be careless when returning something. Maybe they forgot [to include] the original packing slip or took the tags off the merchandise,” Heegan explains. “We built different ‘hooks’ into our WMS to help us [address those issues].”
Quality control and re-barcoding capabilities are a key part of those efforts, allowing the 3PL to get products back into stock or to an alternative outlet faster. The focus on automating these tasks supports Daly’s observation that warehousing companies are increasingly focused on returns—to the benefit of the entire supply chain. She emphasizes that 3PLs and warehouses were originally “made for outbound” but says technology enhancements are helping them better handle the inbound side of the equation—a welcome development for their supply chain partners.
“[Merchants] are looking to improve efficiencies,” she says. “So they’re leaning on their logistics and supply chain companies to achieve those goals.”
Editor’s note: This article originally appeared in the January 2024 issue of DC Velocity.
