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Why Reverse Logistics is Important in Ecommerce

By March 21, 2021April 14th, 2021No Comments

What is reverse logistics?

Simply put, reverse logistics is the opposite of the standard supply chain. It stands for all operations related to the reuse of products and materials. More specifically, the operations in which the goods move from the end-user to the seller or manufacturer.

In ecommerce, reverse logistics is related to product returns and their process.

The general flow of reverse logistics

Reverse logistics is a flow that is in response to consumers’ or downstream channel members’ actions. It is opposite to traditional logistics, a planned flow that is decided by the firm. Below is a graph that outlines the typical cycle of traditional logistics and reverse logistics in retail. (Click on the image for its source.)

When a return occurs, the returned product will be collected and sent to the distribution centre. In ecommerce, the consumer will likely return the product by sending it to the warehouse location. (Either to your own warehouse or the 3PL’s warehouse.) If the customer requested a replacement, the flow will change back to the traditional logistics flow.

Why is reverse logistics important to ecommerce?

Returns normally occur in retail. It is a given that it will happen for online shopping as well.

However, returns are more frequent in ecommerce. It is because consumers can’t test the products. Now, online shopping has become popular in the past several years. There will likely be more returns as online shopping volumes increase.

This is where the importance of reverse logistics comes in.

If you can’t handle the returns and customer services professionally, it can damage your brand image. Hence why you need a proper procedure in response to the returns. If you have one in place, it will drastically change the game.

Let’s look at some of the specific benefits of having well-structured reverse logistics.

The benefits of reverse logistics

Customer Retention

In the modern world, speed is a crucial factor in services. If the reverse logistics of your company is too slow, the customer can be annoyed with it. As a result, your company can get a negative review but lose a valuable customer.

Looking at the long run, customer retention is a big factor. In fact, loyal customers have a much higher value than a one-time customer. To gain loyal customers, a hassle-free return procedure is a must. Once the customer has experienced your quality service in an easy and quick return, they will love to come back!

If you want numbers, a survey conducted by Invesp showed 92% answering that they would come back after a good returning experience!

Reduced Costs

When your reverse logistics is structured to perform well, that means it is as simple as it can get. A simple procedure means fewer mistakes and amendments. Few mistakes and amendments mean the costs will automatically reduce!

For example, utilising a PO box for returns can be much easier for the customer. Unlike addresses, it is much shorter, which means less space for mistakes. It will only take one trip for the return, which connects to reduced transportation fees.

Transparency across your Network

In the warehouse, you need to quickly know what product is stored, picked, shipped and returned. Sometimes, operators need to share information. You might be able to achieve the first three in your daily operations. But you can only do the last one with reverse logistics.

Therefore, the last piece to transparency across your network is reverse logistics. Now your warehouse will always see the big picture of the company. It will also allow you to plan better and operate efficiently.

It even helps with inventory management and customer service! You can backtrack the SKUs number of stock. If a customer asks about their order, you can answer swiftly.

Various order statuses. From top: Picked, Ready to Ship, Processed, Returning, Out of Stock, Cancelled.

Increased Velocity

A well-structured return procedure also means faster returns. Faster returns indicate faster business. As mentioned earlier, speed is important. If the product returns to the warehouse faster, the overall transaction cycle increases too.

A good amount of transaction cycle indicates the company’s competency and efficiency in its structure and services. This can connect to customers having a trustworthy image of your company. Plus, it also adds to your brand value!

Strategic Advantage

Ecommerce stores are convenient. Unlike retail, all you have to do is click on the website and place an order. However, this convenience can be a downfall sometimes. Why? Because these two interactions are the only windows for the customer to know about your operations.

Let’s reword the explanation above. A customer experience on your website is composed of only two components. Each component fills up a big part. (Obviously, being half and half.) If either one of these doesn’t do well, your company reputation can plummet down.

So, don’t cut slack. Make sure your services are at their best! One of them is reverse logistics. If your customers have a hard time processing a return, they will likely turn to one of your competitors. Make it easy for them, as a smooth return experience has a high value on the online market.

Higher Achievement of Sustainability Goals

In the 21st Century, the UN World Commission on Environment and Development has defined sustainability as an idea. An idea of meeting “the needs of the present without compromising the ability of future generations to meet their own needs.”

As a part of that idea, reverse logistics has caught people’s attention. After all, it composes of recycling and reusing resources and materials. In fact, it has shown particular promise in the environmental sustainability area.

So, while you improve your reverse logistics, it also means you can achieve your sustainability goals. That itself can also be a brand value if you wanted it to be one. Especially in Australia, as Australians love a nature-loving company.

Conclusion

Reverse logistics brings many benefits. It is now an industry norm in ecommerce. Make sure you structure your reverse logistics well. Write a proper return policy too. Once your return procedure kicks in, the benefits are waiting for you.

If you want to know how you can improve your reverse logistics, try reading this blog post for a start. Another option is to outsource your operations to a 3PL. Using a 3PL (like KeepSpace) can lead to better performance and costs. Thorough research is recommended.

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