Reverse Logistics in eCommerce: Complete Guide to Simplify Returns

What are the main things that a customer tends to check when buying online? Well, apart from prices and desired product descriptions, the answer is they expect to return products easily. This is where reverse logistics becomes very important.

Resultantly, managing returns is one of the main aspects that eCommerce businesses need to take into account. This is because it affects customer confidence and business costs.

Do you know that the cost of reverse logistics can be up to 1.5 times more than regular delivery? Also, online purchases are returned three times more often than items bought in physical stores.

Yes, that's right! Handling returns is costly and complex to manage.

All in all, understanding this concept helps companies plan better and keep customers happy.

This guide will help you improve your reverse logistics process. We will show you how to make returns easier for your customers.

What is Reverse Logistics in eCommerce?

The name itself explains what reverse logistics is. It is the process of handling products that the customers return to the business.

Traditional logistics focuses on delivering products to your consumers. Whereas, reverse logistics works the other way. All in all, this process is an essential part of a responsible supply chain.

Let's understand reverse logistics with the below summary:

• Customers may face defects, wrong items, or dissatisfaction. So, they may decide to return the product for a refund or replacement. So, you will need to handle the returns for these purposes or even for the resale.
• Moreover, it also involves refurbishing or repairing the products to make them usable again without discarding them. This is a great step to extend the product's life cycle and reduce waste by recycling or repurposing them.
• Efficiently manage returns by restocking them for resale or disposing of them properly so that eCommerce companies can save on costs.
• Businesses use data to track, analyze, and optimize the return process under Reverse logistics. Therefore, they can manage these operations efficiently. This also reduces the operational impact of returns.

Want to explore broader logistics trends, check out our latest blog on key trends and the importance of logistics management.

Benefits of Reverse Logistics

A strong reverse logistics system serves the below advantages to eCommerce businesses when they are willing to manage returns smartly.

Cost Savings

The cost of return deliveries was over one trillion U.S. dollars globally in the year 2019. Therefore, this is one of the most essential benefits of an efficient reverse logistics system.

Businesses can save a lot of money in areas like administration and marketing. Also, it contributes towards repairs and disposal to a great extent. With cheaper shipping options for returns and proper management, you get the benefit of transportation savings too.

Customer Satisfaction

As discussed before, customers first need to know if they can smoothly return their products before they buy them. So, to get happier customers and get your customers to recommend your store, businesses need to offer free shipping and full refunds without insisting on original packaging.

Stronger Brand Image

Similarly, the Reverse Logistics process frames an easy returns policy that gets the companies to often earn praise in customer reviews. This in turn improves your reputation whereas a tough policy can damage it. Resultantly, it helps you attract more customers.

Risk Mitigation

Businesses can also reduce risks with this process. How? Well, for example, it involves the safe disposal of faulty products or items that need to be recalled. In the same context, you can securely erase data from returned electronic products before disposal.

Sustainability

When something that comes back is not a waste, you can refurbish, resell, or recycle it. Overall, this reduces the landfill impact and contributes to a cleaner planet. For example - recycling electronic items helps the environment and boosts the eco-friendly brand image. Further, it lowers the carbon footprint and supports sustainability in the eCommerce industry.

Increased Profits

You must have an optimized return process so that you manage returned items efficiently in such a way that you get them back on the shelves.

Returns of products with the wrong size or colour can be repurposed. Whereas, others can be repaired and refurbished. Later, they can be resold. This way you can add extra revenue even as discounted products.

Challenges in Managing Reverse Logistics

Reverse logistics is complex and challenging too. Well, online shopping in India has a return rate between 25% to 40%. In other words, out of every 100 products sold online, 25 to 40 are returned by customers.

That's right! The flow is really high and you need to manage it in multiple steps too once they are back in the system. Below are some other complications in the system.

Space

You may face space constraints in managing returns in warehouses due to the rise in online shopping and returns.

Damaged Returns

Damaged product returns can result in high operational costs. You must process them carefully and that involves various steps from inspection and repair, to repackaging.

Fraudulent Returns

While returns are a great feature for eCommerce customers, many find ways to exploit it. They might try to return used or even damaged goods. So, businesses have to bear those losses. In such cases, you need to implement a strict return policy.

Customer Expectations

You may risk losing customer trust and loyalty if you do not provide a smooth and free-of-cost return process.

Complex Flows

The flow of returns is hard to track and time-consuming due to a multi-step and complex reverse logistics process. Careful management is required to remedy this. Well, returns are inconsistent so it becomes difficult for businesses to plan resources and manage the return process.

Stock Management and Valuation Issues

Tracking stock levels with so many returns becomes difficult and may cause inventory issues too. Also, it is complex to manage repairs or unsellable items before restocking.

This also has an impact on estimating the resale value of returned goods. Accurate valuation is essential so you do not lose money in the process.

Environmental Impact

Reverse logistics may affect your carbon footprint too. Transportation, repackaging, and discarding returns need eco-friendly solutions.

Types of Reverse Logistics

Reverse logistics has multiple components i.e. the types of reverse logistics discussed below.

Product Returns

This is the most common type of reverse logistics. Customers returning due to defects or dissatisfaction fall into this component. You must manage the sort and inspect critically to ensure customer satisfaction. This way, you can decide the next steps with the product such as if you must resell it or refurbish, recycle, or dispose of it.

Remanufacturing and Refurbishment

This type is for products in usable condition. You need to decide if they can be remanufactured or refurbished to bring them back to their original or even better condition.

Recycling

Recycling is for the products that you cannot resell or repair. The reverse logistics process is to extract valuable raw materials from returned items. Therefore, they are reused instead of thrown away. This type benefits in reducing waste and promoting a circular economy.

Reuse

Reuse Reverse logistics type involves the products in good condition so you need not discard them and recover their value through the process. You need to clean, test, and resell them as refurbished or second-hand products.

Resale

Many times products are not returned due to quality. So, such items can be resold as it is. Therefore, businesses can recover value without extensive processing.

Packaging Management

This type focuses on handling packaging materials to minimise waste and improve sustainability.

Unsold Goods

Retailers often return unsold items so can also be a part of reverse logistics. The results may involve returning them to the manufacturer after repackaging. Alternatively, you may need to dispose of them if they can't be resold.

Repairs and Maintenance

Some companies include repair services if the returned products have defects or damage. Later, these products can be resold to the same customer or a different one.

Green Reverse Logistics

This type is a term for sustainable reverse logistics components such as recycling, reusing, and environmentally friendly disposal. This way reduces the environmental impact of returned products by minimizing waste.

End-of-Life (EOL) Management

Products that reach the end of their useful life need to be responsibly managed. They may need to be recycled, disposed of, or refurbished for a new purpose. This component is important as it helps businesses comply with environmental regulations.

Rentals and Leasing

Leased or rented products need to be returned at the end of their contract. After that, you may need to repair, recycle, or remarket them so that their lifecycle is extended.

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How ILS Portal Simplify Returns Management

ILS Portal offers a user-friendly interface to simplify returns management and make the entire reverse logistics process super-smooth. Our approach ensures top-notch customer satisfaction.

Key Features

The ILS Portal features below make the process customer-friendly.

• Manage and handle returns requests effectively with smooth and easy steps.
• Create customisable invoices to reflect your brand's identity and add a professional touch to operations.
• The system has a feature in which you can directly print shipping labels that saves your time and resources.
• You can ensure transparency and trust as customers can track their delivery in real time.
• The platform automatically sends email notifications at key stages so customers stay informed at all times.

Conclusion

The forecasts say that the global reverse logistics market will rise from USD 801.64 billion in 2024 to USD 1,166.81 billion by 2032. That is an annual growth rate of 4.8%. With eCommerce growing, the reverse logistics market is bound to grow. Well, it is highly essential to manage product returns.

Moreover, it also involves a series of steps that help businesses reduce costs and minimize waste. Resultantly, customers stay happy.

You can simplify your return processes and manage reverse logistics more effectively with the ILS Portal. It provides tools and solutions designed to optimize operations.