Reverse logistics, the process of managing the flow of products from the customer back to your warehouse or store, is a key element of eCommerce management.
While reverse logistics may not receive as much attention as forward logistics, it is just as important, if not more so, for maintaining customer satisfaction, reducing costs, and increasing sustainability.
Here’s everything you need to know about reverse logistics for eCommerce, along with tips for optimizing your process for maximum efficiency.
Table of Contents
What is Reverse Logistics?
Reverse logistics is the process of getting a returned product back from the customer to the store or warehouse.
When a customer returns a product, reverse logistics manages the flow of the product back to the store or warehouse, including return shipping and tracking, item validation, and restocking or disposal.
Understanding the ins and outs of reverse logistics helps you stay competitive and keep your customers happy.
What’s the Difference Between Traditional Logistics and Reverse Logistics?
The difference between traditional logistics and reverse logistics is that traditional logistics, aka forward logistics, refers to the process of getting products from the store to the customer. Reverse logistics, on the other hand, refers to the process of returning products from the customer back to the store.
Reverse logistics involves managing the logistics of shipping returned products, receiving them, evaluating their condition, determining whether they can be resold, and processing refunds or exchanges.
In comparison with traditional forward logistics, reverse logistics involves additional challenges such as tracking returns, processing returned products, and restocking or disposing of returned products.
How to Build an Effective Reverse Logistics Strategy
For reverse logistics to be effective, it is essential to have a well-defined process, to communicate clearly with customers, and to utilize technology to improve efficiency.
Building an effective reverse logistics strategy requires careful planning, with a lot of things to take into consideration. Let’s break down what you need to know to create an effective strategy for managing reverse logistics.
1. Identify the Scope of Your Reverse Logistics
Understanding the scope of your store’s returns is the first step in managing reverse logistics effectively.
The scope of your reverse logistics includes the types of returns you receive, the frequency of returns, the condition of returned products, and the channels through which they are returned.
By identifying the scope of your reverse logistics, you can tailor your reverse logistics strategy to maximize efficiency and minimize costs.
If you know what your reverse logistics process looks like now, you can design a strategy to maximize efficiency and reduce costs.
2. Invest in Technology and Automation
Many aspects of your reverse logistics can be automated so that you can manage returns more effectively. Use technology such as returns management systems, warehouse management systems, and third-party logistics providers to streamline your reverse logistics.
Returns Management Systems (RMS)
A returns management system (RMS) is a software solution designed to streamline the returns process for eCommerce businesses. An RMS can automate the entire process, from receiving the return request to processing the return and issuing a refund or exchange. With an RMS in place, eCommerce businesses can:
Reduce Processing Time – An RMS can automate the process of receiving returns and tracking their progress. This eliminates the need for manual tracking and data entry, saving time and reducing errors.
Improve Customer Experience – With an RMS, eCommerce businesses can provide their customers with a hassle-free returns process. Customers can initiate returns online, track the progress of their return, and receive timely updates on their refund or exchange.
Increase Efficiency – An RMS can help eCommerce businesses optimize their returns process by identifying patterns in returns and identifying areas for improvement. This can help reduce the number of returns and improve the overall efficiency of the process.
Using a returns management system such as ReturnGO can significantly streamline your reverse logistics by enabling you to efficiently manage the returns process, providing you with real-time visibility into the status of each item, from receipt through inspection, disposition, and final resolution.
These systems can help you automate key tasks, reducing the risk of errors and speeding up the entire returns process.
Warehouse Management Systems (WMS)
A warehouse management system (WMS) is a software solution designed to optimize warehouse operations and manage inventory.
Using a WMS will help you manage the process of receiving returned products back to your warehouse, and you can integrate it with ReturnGO to manage your reverse logistics all in one place.
By implementing a WMS, you can:
Optimize Inventory Management – A WMS helps you track returned products, optimizing inventory management and ensuring that returned products are processed quickly and accurately.
Improve Order Fulfillment – A WMS can help you fulfill orders faster by identifying the location of returned products and making them available for resale.
Increase Efficiency – A WMS can optimize your returns process by tracking item validation, restocking, and disposal of returned products.
By automating and streamlining your reverse logistics process, a warehouse management system (WMS) will make managing and tracking returned items easier.
3rd-Party Logistics (3PL) Providers
3rd-party logistics (3PL) providers are companies that specialize in logistics and supply chain management. 3PLs provide logistical services such as order fulfillment, inventory management, and warehousing.
Using a 3PL can help you streamline your returns process and save you money by:
Providing Expertise – 3PLs are experienced in managing logistics and supply chain operations and can provide expert guidance on optimizing reverse logistics.
Offering Scalability – 3PLs can help you scale up and manage the volume of returns as they increase without having to invest in additional resources or facilities.
Reducing Costs – 3PLs reduce the costs associated with managing returns by offering a more cost-effective solution than managing the process in-house, saving you money on labor and other expenses.
There is a growing trend towards using 3PLs – 40% of retailers use a 3PL to handle returns. By outsourcing reverse logistics to a 3PL, you can focus on other tasks while being confident that your returned products are being handled efficiently.
3. Develop a Process for Handling Returned Products
Set up a clearly-defined process for how your store handles returned products. Determine who is responsible for what, and what the protocol is for different types of products, conditions, and situations.
Establish clear rules for what products will be accepted and what happens to them.
Define what condition products must be in in order to be restocked, and what happens if they are not in good condition.
Elements to Define in Your Reverse logistics Process
Define the following aspects of your reverse logistics process and how you want to handle them:
- The conditions for a return – Which products can be returned or exchanged? Does the original tag need to be attached? What other conditions apply?
- How customers can return items – What shipping carriers do you use? How do you track return shipments?
- Who is responsible for validating returned items – Do you use a WMS? Do you have a dedicated returns team? What do they look at when validating returns?
- What happens to returned products – Are they restocked and resold? When do they get discarded or recycled? Do you resell them at a discount?
Follow the 5 “R”s of Reverse Logistics
When developing your reverse logistics process, it can help to consider the 5 “R”s of reverse logistics:
1. Returns – How are returns handled and processed?
2. Receiving – How are returned products received and validated?
3. Refurbishing – Do you refurbish returned products and if so, what’s the process for that?
4. Reselling – Do you resell returned products and if so, how?
5. Recycling – What happens to products that can’t be resold, can you recycle or repurpose them?
By taking into account the 5 Rs of reverse logistics, you can make sure that your returns process is optimized at every stage, from receiving and processing returns to restocking, refurbishing, or recycling products.
4. Establish a Clear Return Policy
A clearly-defined return policy helps set expectations and clarify the returns process for customers. This transparency helps increase customer satisfaction and reduces the likelihood of return fraud and returns that don’t meet your requirements.
Establish a clear return policy that outlines the acceptable reasons for returns, the timeline for returning products, acceptable product conditions, and the types of returns and exchanges offered.
When creating your return policy, consider the following:
Define how long customers have to return products. The average eCommerce return window is 30 days, but what makes sense for your store may vary depending on the type of products you sell, your target market, and your industry.
For example, products with a short shelf life or expiration date, such as food or beauty products, often have a shorter return window to prevent customers from returning expired or unusable products that can’t be resold.
On the other hand, expensive items or items that require more time to evaluate, such as furniture or clothing, usually require a longer return window so that customers can try and test the item before deciding whether to keep it.
It’s important to clearly state your return window on your website and anywhere you sell your products, so customers know what to expect.
Condition of the Product
Be clear about the condition of the products that you will accept for returns. This helps to prevent misunderstandings, as customers will have a clear understanding of what is expected of them when returning a product.
For example, if you sell apparel, you may only accept returns on unworn, unwashed items with tags still attached.
Alternatively, if you sell electronics, you might accept returns only for items that are still in their original packaging and have not been opened or used.
Make sure that your team members are trained to inspect returned items to make sure they comply with your return policy. This will help you avoid accepting items that don’t meet your requirements, and help you process returns more efficiently.
Who Pays for Shipping
Specify whether your customers will be responsible for paying for return shipping or if you offer free return shipping in certain circumstances.
Despite the fact that customers increasingly expect not to be charged for returning items, less than half of eCommerce stores offer free return shipping, so offering free return shipping gives you a competitive advantage.
You can use free return shipping as an incentive during the holiday season, as a loyalty reward, or to encourage exchanges over refunds.
Refund or Exchange Options
Clearly outline what options customers have for refunds, exchanges, store credit, or gift cards.
There are different types of returns you can offer, depending on your business and the types of products that you sell. Some common options include:
Refunds – Refunds are the most commonly requested type of return. You can refund customers in various ways, such as back to the original payment method, or directly to their bank account.
Exchanges – Exchanges enable customers to exchange an item for a different size, color, or product. This can be a good option for customers who received an item that didn’t fit, or who changed their mind about the product.
Store credit or gift cards – Store credit and gift cards can be offered to customers instead of giving them a refund. This keeps the revenue within your store and encourages customers to purchase again.
It’s important to clearly outline the refund or exchange options that you offer to customers, including any conditions or limitations that may apply.
Shipping and Handling Fees
Clarify whether customers will be charged any fees associated with their return. Provide an estimate of the cost so as to set expectations in advance.
Some types of fees commonly associated with returns include:
Restocking fee – A restocking fee is typically a percentage of the product’s original price and is intended to cover the costs of inspecting, repackaging, and restocking the returned item.
Processing fee – A processing fee may be applied to cover the administrative costs associated with processing a return.
Return shipping fee – A return shipping fee can be charged in cases where the customer is responsible for paying for return shipping.
Whatever fees you choose to charge, it’s important to clearly communicate these fees to your customers in your return policy to avoid any confusion or misunderstandings.
Give customers clear instructions on how to initiate a return, including what information they need (i.e order number), how long to expect the process to take, and how they’ll be expected to return the item.
Make sure that your return policy is clearly displayed on your website and that it’s written in easy-to-understand language.
Add a link to your return policy on product pages, in emails, and on your website header or footer to make it easy for customers to find.
Having a clear return policy will help reduce misunderstandings and prevent customers from trying to return unsuitable items or contact customer support, thus streamlining the reverse logistics process.
5. Analyze Returns Data for Opportunities to Improve
Returns are a valuable source of data that can provide insights into customer behavior, product quality, and process efficiency.
By analyzing your returns data, you can identify opportunities to reduce returns, improve product quality, and streamline your reverse logistics process.
Some metrics to track include:
Product Return Rate
The percentage of products that are returned. This can help you identify patterns such as specific products or product categories that have a higher return rate.
Distribution of reasons that customers give for returning products. This can help you identify recurring issues with a certain product or areas where product descriptions can be improved.
Reverse Logistics Costs
The costs associated with processing a return, including shipping, handling, and restocking. This can help you identify opportunities to reduce costs and improve the efficiency of the reverse logistics process.
Tracking these reverse logistics metrics will give you a better understanding of your reverse logistics process and help you pinpoint opportunities for improvement.
“ReturnGO’s analytics provides more than basic statistics such as how many products were returned and what the return rate is, it also provides other interesting insights from which you can really conclude which products are more profitable and which are less so.”– Felix Leshno, Co-Founder and CXO, Underoutfit
6. Monitor and Improve Your Strategy
It’s important to continually monitor and improve your reverse logistics to ensure that it remains effective over time.
Each stage of the reverse logistics process, from receiving and processing returns to restocking, repairing, or disposing of products, presents opportunities for optimizing the process and reducing costs.
To monitor the efficiency of the reverse logistics process, you can:
Track Return Metrics
Keep track of your returns data and the efficiency of your logistics to keep an eye on how things are going and make improvements where necessary.
Collect Customer Feedback
By asking customers for feedback on the returns process, you can identify areas for improvement and make changes to boost customer satisfaction and loyalty.
For example, customers may provide feedback on how easy the return process is, how clear the return policy is, or what kind of customer service they received throughout the returns process.
One way to gather actionable feedback from customers is by hopping on a call and having them walk you through their return process. Record the call and revisit it later to gain valuable insights into areas for improvement.
Conduct a Process Audit
An audit of your reverse logistics process can help you identify inefficiencies and areas for improvement. This can be done internally or with the help of a 3PL that specializes in reverse logistics.
Best Practices for Successful Reverse Logistics
Follow these best practices to create and maintain a successful reverse logistics process.
Automate Your Reverse Logistics Process
Implementing automation can be a game-changer for streamlining your reverse logistics process. Automating your reverse logistics can help reduce labor costs, speed up processing times, and improve accuracy.
Use a returns management system like ReturnGO, together with warehouse management systems, 3PLs, shipping carriers, and other logistics partners to streamline your reverse logistics process and manage returns more efficiently.
Implement Circular Economy Practices
A circular economy is one where resources are kept in use as long as possible, waste is minimized, and materials are continually reused. This can be applied to reverse logistics by implementing practices that prioritize sustainability and reduce waste.
Sustainability is becoming increasingly important for customers, who are increasingly aware of the environmental impact of shopping and are looking to buy from stores that are committed to sustainability.
In fact, 78% of customers say their purchasing decisions are influenced by a brand’s environmental practices.
Some examples of circular economy practices you can implement:
Reselling – Consider repairing and reselling returned products instead of discarding them. This reduces waste and extends the life cycle of the product.
Recycling – If a returned product can’t be repaired and resold, you can recycle it to recover valuable materials and cut down on waste.
Donating – Donate returned products to charities or nonprofit organizations instead of throwing them out to keep the products in use. Besides reducing waste, this is an opportunity to give back to the community and create a positive social impact.
By implementing these circular economy practices into your reverse logistics process, you can reduce waste and minimize your environmental impact while creating new opportunities for revenue and customer engagement.
“We have a dedicated team that assesses the condition of returned flowers and prepares them for resale at a discounted price. In addition, we have partnered with a local charity that collects and repurposes used flowers. This not only helps us to reduce waste but also supports a good cause in our community.”– David Cohen, CEO, Love Rose
Communicate Clearly With Customers
Make sure your customers know exactly what to expect from the returns process and that they receive prompt, professional responses to any queries or concerns they have.
Provide clear return instructions – Give clear instructions for returning products, including information on how to issue a return request, where to send returned products, and the requirements for returns.
Keep your customers updated – Provide customers with regular updates throughout the returns process on the status of their returns, tracking information, and notifications when their refund or exchange has been processed.
Respond promptly to customer concerns – Address customer concerns promptly and professionally and offer solutions or alternatives to resolve issues and show customers that they are valued and supported.
Communicate clearly with customers throughout the return process to make sure that they have a positive return experience.
Most customers say that efficiency, convenience, knowledgeable help, and friendly service are the most important factors for a positive customer experience.
Train Your Team
Make sure that your team understands the process for handling returns and is familiar with the software or systems used. This will help ensure that returns are processed quickly and accurately.
Warehouse staff should be trained on how to properly inspect returned products, including identifying any damage or defects, checking that all components are included, and verifying that the product is in good condition for resale.
Train your customer support team to communicate effectively with customers during the returns process. This includes providing customers with clear and timely information on the status of their returns, answering any questions or concerns, and resolving issues as they arise.
Having a competent team is one of the best ways to ensure an efficient, streamlined reverse logistics process and a positive customer experience.
Challenges of Reverse Logistics
Managing reverse logistics can be a challenging process. Some of the common challenges of reverse logistics include:
Meeting Legal Requirements
Part of managing reverse logistics involves ensuring compliance with legal regulations related to product returns, disposals, and recycling. These laws can be complex and vary by location, making compliance challenging.
Consult with legal professionals to make sure your business meets all applicable legal requirements and follows protocol.
Keeping Down Costs
Reverse logistics can be costly, and managing these costs can be a significant challenge. Costs such as shipping, processing, refurbishing, and disposal costs can quickly add up, especially if you receive a high volume of returns.
It’s important to find ways to minimize your reverse logistics costs while still maintaining high-quality service.
Returns often include products that have been opened, used, or damaged, which can complicate inventory management and make it hard to determine which products can be resold or refurbished and which need to be discarded.
Using a warehouse management system (WMS) can help you keep an eye on inventory levels and ensure that returned products are processed efficiently.
Addressing Customer Concerns
Returns can be a frustrating experience for customers, and a poorly managed reverse logistics process can exacerbate the issue.
Ensure a positive customer experience by being responsive to customer concerns, having a clearly-written return policy, and offering refunds and exchanges in a timely manner.
Examples of Successful Reverse Logistics in eCommerce
Here are a few examples of eCommerce stores that have implemented a successful reverse logistics process.
Apple is one example of successful reverse logistics. Customers are encouraged to trade in their old devices for discounts on new products.
Returned products are sent back to be broken down and recycled into new parts that are used to manufacture new products.
In recent years, Apple has worked to minimize the impact of its products on the environment. Its first sustainability policy was created in 1990, and since then the company has designed new ways to be more energy-efficient and reduce environmental damage.
By offering a trade-in program for repurposing and recycling used products, Apple has an eco-friendly reversal logistics process and saves money on production costs.
Brava Fabrics has created an efficient reverse logistics process that enables them to manage returns smoothly and automatically.
By automating reverse logistics through ReturnGO, Brava Fabrics now manages returns more efficiently and saves thousands of dollars a month.
Automating the process and eliminating manual work enables Brava Fabrics to focus on its core mission of creating durable and iconic apparel.
One of the key components of Brava Fabrics’ efficient reverse logistics process is its integration with multiple shipping carriers. By integrating with various shipping carriers in different regions around the world, they can efficiently handle returns from customers in different locations.
The automation and scalability of the reverse logistics process enable Brava Fabrics to efficiently manage returns as volumes increase, without incurring additional costs or adding staff. This ensures that Brava Fabrics can continue to provide its customers with the highest level of service, even as the business expands.
“We choose carriers according to price and time. So, the best thing about ReturnGO is being able to change these carriers according to our priority, whenever we want.”– Gabriela Meyer Torres, Senior Operation Executive, Brava Fabrics
H&M Group aims to recirculate clothing and textiles through repair, reuse, and remake, taking action to increase sustainability and circularity in the reverse logistics process.
To maximize the resources in existing products, H&M offers garment collection points in nearly all of its stores. Over 140,000 tons of textiles have been collected since the garment collection program began.
Collected items are sorted and recirculated according to their condition: items that can be worn again are resold as second-hand clothing, worn clothes and textiles are turned into new products, such as cleaning cloths, and anything that can’t be resold or reused is shredded into textile fibers and used for things like insulation materials.
In 2021, H&M recycled around 500 tons of textile waste from garment production factories back into products.
By sharing clear, accurate, and relevant information about its supply chain, products, and business standards and policies, H&M demonstrates its commitment to sustainability and circularity.
Streamline Your Reverse Logistics for Smoother Returns
Efficient reverse logistics is crucial for any eCommerce business looking to provide the best possible customer experience while also saving time and money.
By implementing best practices such as automation, using circular economy practices, and establishing a clear return policy, you can save time, reduce costs, and improve customer satisfaction.
With the growth of eCommerce and the movement towards sustainability, it’s important to be proactive in managing your reverse logistics process.