How to handle reverse logistics in ecommerce: 5 simple steps

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In the ecommerce sector, there is not a single aspect that can be overlooked, especially when it comes to customer service. And one of the most important and often forgotten areas is reverse logistics. 

This is the process that enables an ecommerce business to process a customer’s return. Doing this correctly can contribute not only to ensuring customer loyalty, but also that their experience is positive and that they recommend you to other potential buyers. But what does ecommerce reverse logistics involve?

What is reverse logistics in ecommerce?

Reverse logistics in an ecommerce business is the process whereby a customer can return a product that has been purchased from an online store. It starts from the moment the return is requested and ends with the receipt of the product by the business and the money or any compensation by the customer.

While in physical stores reverse logistics is as simple as asking the customer to return the product to the store, in the digital environment it gets more complicated. Big businesses like Amazon and AliExpress have got their customers used to free and very simple returns, which consumers are now demanding from even the smallest businesses. 

And as digital commerce grows, the number of returned products is also increasing. The National Retail Federation (NRF) in the United States estimated that the number of returned orders in the U.S. amounted to $400 billion per year.

Following on from these figures, MyNewDesk shared data estimating this figure will rise to $606.70 billion by 2026 in the regions of North America, Latin America, Europe, Asia, the Middle East and Africa. In 2018, when this study was conducted, the figure stood at $419.1 billion. This would mean a growth of 4.9%. 

However, this study did not take into account the growth of ecommerce triggered by COVID-19. Another study done in 2020 factoring in the pandemic variable estimated even higher figures, reaching $958.3 billion in 2028 in the global market. It started from a figure of $635.6 billion in 2020. In other words, a growth of 5.6%.

One thing is clear from these figures. Online business is growing, and with it the need to return products that do not match customer expectations. As a result, reverse logistics is becoming more and more necessary. 

How does the reverse logistics process work? - Example

Reverse logistics starts from the moment the customer requests a return through your online store’s customer service, as long as it complies with your return policy, of course. 

At that point the distribution chain has to work backwards. The customer needs to return the goods to your warehouse and you will have to offer compensation, either by refunding the money, offering a coupon for the purchase value for other products in your store or by sending the order back in good condition. 

To do this, you will need a form to record the reason for the return and inform the customer of the proper procedure for returning the product. Once the product has been returned, you will have to analyze its condition to decide whether it can remain in your stock, whether you can repair it or whether it should be sent to the recycling chain. 

Let’s look at an example: 

Claire bought a T-shirt from your online store, but when she receives the order the garment is damaged. She contacts your customer service department, where she is given assistance and informed about the procedure to follow. She has to complete a form indicating the reason for the return, in this case a damaged product, and send the T-shirt by registered mail to your warehouse. 

Once the product has been received at your warehouse, an employee checks the product and sees that the damage is due to the garment being discolored. He checks if there are options to fix it, but determines that this is not possible, so he reports the condition of the product and proceeds to recycle it. 

After confirming receipt of the return and its condition, the refund is processed to Claire based on the information she provided in the form sent with the garment. 

What are the costs for an online business?

This process has logistical costs that are not always evident, beyond the most obvious ones, such as hiring a transport company to handle the return shipments. These include the following: 

  • Transportation. As we have mentioned, this is the most obvious one. Whether you ask the customer to bear this expense or your business does it, a courier company must be paid to handle the shipment of the product from the customer and delivery to your warehouse. 
  • Administration. Coordinating reverse logistics entails administrative costs, which may not seem expensive, but does involve allocating part of the business’s resources for this purpose, especially in a large ecommerce business. 
  • Customer service. In addition, in order to process the return, the customer must be able to contact a customer service representative within the ecommerce company to deal with the request and process it. 
  • Recycling. Either because the product cannot be used (in case it is defective and cannot be repaired) or because its packaging is not reusable, waste will have to be managed. This process also has a cost that must be considered. 
  • Repairs. In the event that the product is returned because it is damaged, defective or in disrepair, repair and maintenance work will have to be carried out, which also incurs costs. 
  • Resale. Lastly, if the product is in good condition, you will have to sell it again. This entails another series of expenses to consider, since having sold it more than once the costs are multiplied, especially if the ecommerce company has sales representatives. 

How can you improve the reverse logistics system of your online store?

To improve the reverse logistics management of your online store you can consider the following points: 

  • Returns policy: it needs to be clear, concise and visible on the website. This way you will avoid misunderstandings with your customers. 
  • Customer service: our buyers should easily be able to enter into the return process using your customer service channels. 
  • Shipping costs: make it clear in your return policy whether or not your store is responsible for the shipping costs of the product when it is returned. 
  • Damage control: make sure that, after receiving the return, the product is checked to see if it can be returned to stock, needs to be repaired or cannot be re-sold. 

How can Beeping help you handle your reverse logistics?

As you have already seen, implementing reverse logistics in an ecommerce business is neither simple nor cheap, so having an ally like Beeping might be the best solution to save time and money. 

Let us explain how you can easily implement this process with Beeping with this infographic. 

1. Establish your return policy

The first step is to establish your business’ return policy and add the information on your website. This way customers will know what kind of products can be returned and under what conditions. 

This point is very important, otherwise you will have to accept all returns that are requested. 

2. The customer requests a return

After reading the return policy of your website, and provided that it complies with the established requirements, the customer can request a return from your online store or by contacting your customer service. 

You should send them a form requesting the following information

  • Customer’s name and surname 
  • Order number.
  • Telephone number. 
  • Reason for returning the order, adding the options provided in the return policy. 
  • Account number in case a monetary refund is requested. 

It is important that the name of the store appears clearly on the form, so that when the product is received in the warehouse you will know who it belongs to. 

3. Notify the customer about the next steps

Once the customer has filled out the form you must inform them that they need to send the product to our warehouse. 

To do this, give them the address of Beeping’s warehouse and the proper procedure for sending the product, which is by registered mail from the Post Office. 

4. Receiving the product

When we receive the product in our warehouse we will examine its condition. It is important that the customer fills in the form indicating the reason for the return, because if at first glance there is no damage we will consider the product as satisfactory and we will return it to your stock. 

If, on the other hand, the product looks damaged, we will notify you and upload a photo of the form and the damage to the order to the Airtable platform. 

However, if everything seems OK, we will upload only a photo of the form or, failing that, of the product label, and we will add it back to your stock. 

5. Compensation

Finally, it depends on your return policy what the next step will be. If you have established that there are cash refunds, you must send the customer the total amount of their purchase through the account number indicated on the form. 

If, on the other hand, you offer the shipment of another product, you can manage this from your private customer area.

Another option is to give your customer a coupon that can be redeemed in your store for the value of the product that has been returned. In this case you will have to send them the voucher or add credit to their user profile for their next purchase. 

Contenidos 📋
Implement reverse logistics with Beeping and save time and money.

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