Are you managing your returns effectively? Be honest. If you are like most companies, the answer is probably no. Dealing with returns is probably consuming too much of your time, is consuming precious warehouse space, takes your team’s focus off the core business, and somehow presents new dilemmas to solve on a regular basis. It drains you and your company’s energy, and with the constant assault on margins, it can make the difference between been profitability and losses.
From 2008 to the 2016, online sales have skyrocketed by 40%. A study, published by MarketingProfs, shows that 68% of U.S. consumers say they shop online at least once per month, which is up from 62% a year ago. Without a doubt, more consumers are doing their shopping online, and many are attracted by the generous returns policies, like those found through Amazon.
If you are a Fulfillment by Amazon (FBA) seller, you probably find these customer-friendly policies difficult to manage. Although FBA offers numerous benefits, it also presents several returns challenges.
Without a doubt, if returns are not properly managed, they can be a tremendous source of stress and uncertainty and, simply put, something you wish you could did not have to deal with.
So what are you going to do differently in 2017? As Einstein said, the definition of insanity is doing the same thing over and over and expecting a different result. So, if we are to start with the assumption that you are not insane, what are you going to do differently?
The first step is to have a solid strategic plan to manage, track, and quickly disposition your returns on a channel that will maximize the value. A disposition strategy should include RTV for credit, repair/refurbishment, remarketing and resale using ecommerce or brick and mortar channels, parts harvesting, liquidation, or even recycling. When you get this aspect of doing business under control and managed well, the heavy responsibility suddenly feels lighter, and you can be more assured of obtaining your ROI.
If this sounds like a fantasy, you should know that many successful companies, in fact the most successful ones, get their returns under control and tap into maximizing their ROI. Probably the most important question and first question that must be answered is “Do I manage my returns internally, or should I outsource it to a 3rd party?” Although there is an increasing trend to outsource returns management, some companies continue to keep it in-house. That is until they do a deep dive and look at the economics of the internal costs. In fact, most companies don’t even perform a detailed analysis on their “true” internal costs. Once you add in the labor, fringes, rent, scrap costs, other overhead, and opportunity costs, the exercise can result in an eye-popping number.
This is why, more and more companies are securing an experienced third-party provider to partner to customize a plan that is tailored specifically to their business.
A 3rd party provider can focus the time required to do this successfully by leveraging economies of scale, giving returns continuous oversight, and even offering sales and merchandising expertise for remarketing the returns. By turning the focus on value recovery and improving your reverse logistics strategies, your worrisome product returns could actually become a source of profit to boost your bottom line.
Is a Third-Party Provider Right for Your Business?
Time Really is Money:
The fewer times an item is handled, the faster it can reach its end destination, where value can be recouped. You need a simplified reverse logistics process because the longer it takes to manage your returns and resell them, the more they negatively impact your bottom line. Most inventory will depreciate over time, so the quicker you can get returns into the proper disposition path, the better. One report suggests that improving the return velocity (the time from return notification of product to actual arrival at repair site) can allow a company to achieve millions in additional savings over the previous year. If you can adjust and improve any of the components of the cost-saving equation (the creation, handling, processing, and final disposition of a return item), the total reverse logistics costs can be reduced, ensuring the biggest return for the money or time invested.
What can a provider do? A provider can maximize recoup credits from your suppliers using RTV, lower or eliminate your internal returns management costs, and select the best disposition path the maximize the return value. They can provide sales reports and metrics that allow you to determine your ROI, breaking down the information by individual item, model number, category, or price point for analysis. They should provide you with detailed status reports that convey in-depth technical information, including quantity, condition, serial number, defect (if applicable), and included and/or missing accessories.
Marketing Expertise is Required: You need to be marketing through the proper channels; the ones that your potential customers are on. The fact is, the same basic principle holds true for marketing and remarketing: you need to be where your customers are. According to MIT Sloan Management Review
, an average-sized company can lose up to 50 percent of its returned inventory value if it fails to effectively take advantage of the correct secondary sales channels. What can a provider do? Your provider can partner with you to identify the disposition channel that yields the highest return for each asset. Online channels like eBay, Amazon, Newegg, Rakuten, and other popular platforms are effective for resale. If you do not excel at navigating all the moving parts of e-commerce, you are better off hiring a high-quality third-party logistics service provider that can take the task off your hands, allowing you to focus on what you do best.
Customer Service Counts: The ease with which customers can make returns or purchases will be reflected in your revenue. Also, the professional appearance of your online store can either bolster or negatively impact your company’s branding. One study revealed that inattentive or poor return experiences in the online marketplace resulted in as many as nine out of 10 customers taking their business elsewhere. What can a provider do? Your provider should have an excellent rating and offer superior customer service in which to draw more traffic to your products and increase your sales. Studies prove that customers are willing to pay more for products that are presented in professional manner and sold by top-rated sellers.
By partnering with an experienced reverse logistics partner, you receive customized solutions to manage your returns efficiently and to achieve the maximum possible ROI. Their services should include LEAN quality control, data security, 4-point product evaluation, RTV management, and smart merchandising to ensure the highest recovery value, allowing you to focus on other important aspects of your business.
David Lahme, President of TradePort USA, a national provider of product returns management solutions to retailers, ecommerce sellers and distribution.