Amid supply chain bottlenecks and higher shipping costs, there’s another challenge plaguing retail businesses—the pile-up of product returns. In fact, several major retailers are considering asking customers to keep returned items after they are refunded in order to manage an overabundance of inventory in their stores and facilities.
Reverse logistics, or the process for managing product returns, is necessary for most retailers, but takes up valuable resources such as labor, time, budget and inventory space. Beyond revenue loss and resourcing needed to manage reverse logistics, the high volume of product returns also presents another issue—a negative impact on a retailer’s sustainability efforts.
How retail SMBs are managing returns
In Software Advice’s survey of supply chain managers at small and midsize retail businesses (SMBs), 89% say that sustainability is an important factor in their reverse logistics strategy, but only 54% dispose of returns responsibly. And, nearly two in five are burning or sending products to landfills.
The research also reveals that public statements don’t align with actions. Nearly half (46%) of surveyed supply chain managers say their company's communication about sustainability efforts doesn't accurately reflect what's actually being practiced, indicating misalignment across the organization.
Online-only shops are doing more to reduce returns
On average, online-only retail shops in Software Advice’s survey have taken more action to prevent returns, compared to brick-and-mortar stores.
And it seems like their efforts are paying off. Surveyed online-only retailers report a lower rate of returns in 2021, compared to their brick-and-mortar counterparts. This difference may be attributed to how many e-commerce shops are set up. Online retailers are designing their processes to better accommodate returns, whereas reverse logistics may still be an after-thought to some small brick-and-mortar retailers.
How to make your reverse logistics strategy more sustainable
Consumers care about sustainability and that impacts the bottom line. In a Capterra survey, 53% of consumers say they are moderately to significantly influenced by a company’s sustainability actions while shopping. This is especially important among Gen Z shoppers, whose buying power will continue to grow in the coming years.
Here are four ways to improve the sustainability of your reverse logistics strategy while also helping consumers understand your efforts:
- Increase collaboration between marketing and logistics teams
Marketing and logistics teams are often siloed and this can lead to misalignment between a company’s public messaging on sustainability efforts and its actual processes. Prioritize cross-team collaboration to ensure accurate public messaging on sustainable business practices.
- Discourage returns in the first place
Retail SMBs can reduce returns by using thoughtful packaging that prevents damage during shipping and providing extensive product information such as online reviews, product videos, and descriptions. Other ideas include narrowing the return window or charging customers with return shipping or restocking fees.
- Resell returned items
While product material and type determines what a retailer can do once an item is returned, repackaging and repairing products to be resold are the most common actions taken by retail SMBs. These actions are also environmentally safe ways to recoup costs and lower the need for new materials.
- Revisit your returns policy
Gather information on buying behavior from your sales team to inform whether your returns policy should be updated to help reduce the number of returned items. From this exercise, there may be small changes that can improve the sustainability and efficiency of your reverse logistics management such as having the customer recycle/donate the item or narrowing the return window.
How technology can support a sustainable reverse logistics strategy
While organizations are already leveraging technology in much of their supply chain processes, it’s important to remember that it can also be used to support a sustainable reverse logistics strategy, especially when partnering with marketing and product design to strategize improvements.
For example, teams can use e-commerce software to better market products by providing more extensive product information and managing online reviews to help customers before they make a purchase. And, returns management software can also help identify inefficiencies in reverse logistics processes and track the volume of returns for certain products. Together, you can compare data and identify areas of improvement to reduce the number of returned products.
Product returns are an inevitable part of retail business and consumers are increasingly prioritizing sustainability. Don’t undermine your efforts to attract new, younger customers with sustainably-designed products by just trashing or burning returned goods. Instead, take these concrete steps to improve the sustainability of your reverse logistics while also recouping costs to support your bottom line.
