Mindmap for Returns Management

In the past, companies did their best to make it as difficult as possible to return goods. Nowadays, however, they compete for the customer’s favour by simplifying and reducing the cost of the entire returns management process. Logistics service provider XPO Logistics and Supply Chain Media have created this Mindmap for Returns Management outlining the route, with road signs indicating the potential hazards along the way.

Mindmap manual

Market Trends

In view of the extensive choice of online stores and the inherent competition, returns policies are playing an increasingly important role. Consumers have become so pampered that they almost expect to be able to return goods for free. In fact, they take that into consideration when selecting which online stores to buy from. Research shows that the most loyal customers return the most; they often have an active account with various orders and returns in progress at the same time. On paper these customers generate the most expense for the retailer, but they are also the most profitable because the benefits outweigh the costs.

Impact

Some online customers constantly have products at home that they are assessing before deciding whether to keep or return them. Ultimately, they end up keeping more than they return, so offering easy returns leads to increased sales. The burning question, however, is how retailers can remain profitable despite all the return costs. Turnover figures often look positive – and sometimes even impressive – but in many cases the profit is not forthcoming. In some sectors with a short sales cycle, such as fashion, returns logistics is a race against time. The longer the goods spend in transit and being returned, the more the products decline in value.

Challenges

Getting the product to the customer can easily make up two-thirds of the total logistics costs of an e-commerce order, and even more in the case of a cross-borderorder due to the distances products need to cover. Needless to say, if products are returned the transport costs account for an even greater share. In addition there are extra costs for quality control. So how can you optimize your returns logistics setup.

Solutions

The returns process must be as quick and simple as possible, but the retailer’s ultimate aim should be to minimize returns. For quicker delivery to the customer and to receive returns faster, it is essential for retailers to be as close to their customers as possible. This offers huge potential for cost savings, but is only cost-effective for large volumes. So the crux is to scale up, possibly (but not necessarily) by outsourcing.