Returns Management: What It Is, And Why It’s Important

Businesses often see returns as a sore point in their operations and a drain on their profits. Issues include the costs incurred for handling the returned product, shipping a replacement or crediting the customer, as well as paying employees needed for the job. All this can have a negative impact on the efficiency and profitability of your business.

And this is a problem that is not going to go away on its own. With online sales growing, the number of returns is expected to grow, as the majority of returns come from online sales, although brick-and-mortar shops also contribute to the statistics. It is estimated that online sales are three to four times above those of traditional brick-and-mortar shops, with all predictions showing continued growth over the coming years. This can only result in growing pressure on the reverse logistics chain.

But instead of looking at returns as a problem to be avoided and minimized, you can look at it as an opportunity to add value to your business. For that, however, your business needs to develop efficient processes that are able to handle returns at the logistical level as well as extract as much value as possible from the returned products.

Another important factor to consider is the relationship with the customer. An efficient and hassle-free returns process is an important factor in fostering customer loyalty, which results in repeat business and increased profits. Also, listening to your customers will help you assess the situation, pinpoint the reasons for returns and provide you valuable information that will help you improve your products and services.

So the first step you need to take is to understand the reasons behind the returns and what can be done in the production, design or the marketing process that can go towards reducing the chance of a product being returned in the first place. Listening to your customers is an important step in the returns management process because providing a well-rounded package that serves the customer in the first place often reduces the return frequency.

It is also important to assess the demand for any product that will impact your relationship with middlemen or distributors. This will help you reduce the chance of distributors overbooking products or retailers ordering beyond the actual demand for a certain product. You do not have to impose order restrictions but rather set up a dialogue with your clients, pointing to the demand figures and helping them better assess their order requirements.

But reducing returns is not enough. In fact, the goal is not just to have fewer returns to deal with, but rather to deal with returns in such a way that they will actually contribute to the value of your business, instead of being a drain and a hassle. This means you will need to have a returns management system in place that will operate smoothly and cut down on those incurred costs, as well as extract the most value out of returned products.

Many businesses lack the ability to decide what to do with returned products. There are many different options, depending on the product in question, its condition, and the reason for the return. This is why learning more about reverse logistics is essential for the success of your business. Knowing whether, for a specific product, it is more convenient for you to scrap it, return it to the vendor, send it to the secondary market or repair and refurbish can make the difference between profit and loss. The latter options especially open up new business opportunities and can go a long way in helping your business recoup their losses.

Crucially, though, you should have a holistic view of this issue and consider the net recovery value of the returned products over a given period: the value extracted from the returned products minus the costs involved in the process. Costs include processing costs, transportation costs and repair costs. This information will allow you to adjust your returns management system.

The climate in the supply chain is constantly evolving and in this day and age, more and more companies are relying on technology to cut down costs and set the course for profitability. Writing off millions in customer returned products simply as the cost of doing business is a big mistake since there are already reverse logistics solutions that will save you time and money.

This process can be outsourced to a third-party logistics company (3PL) such as goTRG and watch your costs go down. goTRG is a top-tier company for supply chain solutions, forward and reverse, perfectly suited to dealing with your reverse logistics issues.

goTRG’s returns management solutions and AI-powered R1 SaaS platform for omnichannel and supply chain enable retailers to secure the highest recovery of net costs, according to goTRG’s CEO Sender Shamiss. This innovative solution provides businesses the ability to maximize recovery in the returns process. Its systems provide real-time decision-making and profit predictions, helping you make the right decisions along the reverse supply chain to guarantee you the highest return benefits. If you turn your back on these technological advancements, you might find yourself far behind the competition.

Technological advancements have provided companies with the possibility of significantly streamlining their returns management systems and every aspect of the supply chain. This has been made possible by the use of systems automation, artificial intelligence and a whole plethora of sophisticated supply chain solutions that are growing in popularity.

Ignoring the growing pressure created by returns will certainly leave you in the past of the e-commerce business. Ignoring supply chain technological solutions can leave a company struggling to stay competitive in the evolving market, especially with top players such as Walmart or Amazon embracing the technological future.

In the end, there are several things you must do in order to streamline and make the most out of your returns management process and that is to communicate with your customers, your clients, get to know your products and deploy adequate technology that will boost your returns management and as a result your company’s competitiveness and profits.

Direct Liquidation is a goTRG company.

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Henley Johnson

Henley currently works as a sales representative for Direct Liquidation, assisting businesses with product sourcing of liquidated merchandise from the largest retailers in the world. Whether you are looking for a pallet or a truckload Henley is here to help you grow your business.

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