For ecommerce businesses, returns happen. Ecommerce return rates are similar to the rate of returns for brick-and-mortar stores at this point.
Returns processing can be complicated, expensive, and time-consuming, but it’s simply a part of doing business. Merchandise returns are estimated to hit $890 billion in 2024, accounting for approximately 16.9 % of total retail sales, according to Forbes.
A 3PL returns partner can help businesses overcome the challenges that come along with ecommerce returns management.
WHAT IS A 3PL PROVIDER?
3PLs, also known as third-party logistics providers, offer contracted transportation and logistics services to help their customers manage and execute some or all of their supply chain operations.
Most 3PLs offer solutions that are tailored to each client’s needs. This could mean handling a single step in the logistics process or fully managed logistics services that take the entirety of operations off the client’s plate.
WHAT SERVICES DO 3PLS OFFER?
Some services 3PLs may offer include:
PROCUREMENT
Some 3PLs offer procurement services, helping ecommerce companies source raw materials and/or products.
WAREHOUSING
3PLs that offer warehousing services can help companies with warehousing tasks, including receiving freight, storage, and transportation to and/or from the warehouse.
3PL warehouses may offer multi-client warehouses where multiple customers’ products are housed in one warehouse, or dedicated warehousing services where one or more warehouse is dedicated to a single customer.
ORDER FULFILMENT FULFILLMENT
Many 3PL warehouses offer order fulfillment, which commonly includes picking and packing, inventory management, and getting the packages on their way to the end customer.
Some 3PLs may also offer value-added services, such as repackaging or kitting.
TRANSPORTATION
Whether you’re transporting goods by air, land, or sea, 3PLs can offer value-added transportation services that utilise the power of scale and deep experience to optimise the shipping process.
RETURNS PROCESSING
Also known as reverse logistics, 3PL returns processing may include the following services:
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Facilitating customer returns, including sending shipping labels, and scheduling pickups via last-mile delivery providers.
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Receiving returned items
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Inspecting and sorting returned products
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Managing refunds or replacements for the customer
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Managing returned inventory
WHAT IS A 3PL RETURN WAREHOUSE AND WHAT DO THEY DO?
A 3PL return warehouse, or a returns processing centre, commonly handles the entire returns process for their customers, including these steps:
CREATING A RETURN MATERIALS’ AUTHORISATION
When a 3PL helps with returns management, they will handle creating return materials authorisations (RMAs). RMAs are created when customers start their return online and the RMA numbers created help identify the item or items involved in the return.
RMA numbers can be used for analysis, helping you see the volume of items being returned, track the reasons for the returns, and identify any trends.
RECEIVING RETURNED PRODUCTS
Returned products will be received at the 3PL return warehouse and prepared for inspection and sorting.
INSPECTING AND SORTING RETURNED ITEMS
Staff working in the 3PL warehouse will conduct inspections of returned items to assess the quality of these products. They will sort through the products, ensuring only items in good condition that meet your quality standards go back into your inventory.
SUSTAINABLE, ETHICAL DISPOSAL OF UNUSABLE RETURNED PRODUCTS
Any returned items that have been deemed unsatisfactory or unsuitable will be disposed of appropriately, sustainably, and ethically.
RESTOCKING ITEMS IN NEW CONDITION
Items that are in good enough condition to be added back into inventory will go through a process called reconditioning to ensure they are being restocked in new condition. This includes refolding clothes neatly or repackaging individual components of a product.
Products will then be restocked and added back to the warehouse’s shelves.
RESALE OF ITEMS WITH DAMAGED PACKAGING OR MILD DEFECTS
Products that are returned with damaged packaging or mild defects may be put up for resale at a discounted price. With 3PL returns management, this will be handled for you.
REPORTING TO KEEP CUSTOMERS INFORMED OF RETURNS AND CHANGES IN INVENTORY
Your 3PL provider will take on the responsibility of updating customers about the status of their return. This can include things like the stage of the process that their return is currently in.
WHAT CHALLENGES DO ECOMMERCE BUSINESSES FACE DURING RETURN PROCESSING?
COST OF ECOMMERCE RETURNS
According to a report released by the National Retail Federation and Appriss Retail, in 2022 the average retailer incurred $165 million in retail returns for every $1 billion in sales. That’s a lot of dough!
The cost of returns not only includes the cost of the returned products but also logistics costs. It costs money to receive, inspect, sort, restock, resell, or dispose of returned items.
Also, since consumer expectations dictate it, many retailers cover some or all of the cost of shipping returns.
Returns tend to cost even more when companies don’t have great processes in place, and there are plenty of intangible costs associated with returns that can impact companies’ financials.
For example, if a customer is unhappy with their return experience, they may opt not to shop with the retailer next time. That lost future business isn’t a direct cost, but it hurts the bottom line in the long run, nonetheless.
COMPLEXITY OF ECOMMERCE RETURNS
Because there are several necessary steps in the reverse logistics process, it can be difficult for the average ecommerce retailer to manage.
The returns process touches so many different areas of the business, from customer service to warehousing to shipping and beyond, and each of those areas must effectively communicate with the others to ensure the customer is satisfied with their returns experience.
Deciding what to do with returned products can also be very complicated. Determining whether the packaging or the item itself is damaged is difficult enough.
Regulations surrounding returned items can muck up the process further, affecting which items can be resold and how to dispose of certain items. Not abiding by the regulations could land a company in legal hot water.
TIME IT TAKES TO COMPLETE ECOMMERCE RETURNS
Due to the additional steps required in returns processing, it can take longer than an initial order, especially during the surges of returns that are common after major holidays.
Smaller businesses without dedicated returns staff may even set returns aside to be processed later. That may mean it takes additional time to get the end customer a refund or replacement. This can really hurt businesses during the post-holiday season.
REQUIRED EXPERTISE FOR ECOMMERCE RETURNS MANAGEMENT
Because returns are complicated and can take up a lot of space, many ecommerce businesses simply don’t have the resources to deal with them effectively.
They may struggle with efficiency. It might take a long time for staff to process returns, eating into other productive tasks those employees could be performing. It might take a long time for the company to make time and/or space to process returns.
Lack of efficiency may also show through as a lack of revenue from returned items when they go unsold, either because the returned products aren’t being restocked promptly when they’re in new condition or because they’re not being sold as seconds or imperfect items.
CUSTOMER SATISFACTION
Customer satisfaction is critical to ecommerce businesses. Consumer expectations have changed drastically over the past several years, forcing retailers to rise to the occasion.
Since so many consumers rely on customer reviews and word-of-mouth marketing to determine whether they’ll shop with an online retailer, meeting those expectations is a critical component to success in an industry awash with competitors.
When returns processing doesn’t go smoothly and takes a long time, it will likely have an impact on the customer’s overall online shopping experience. According to a joint Happy Returns and NRF consumer survey, 67% of consumers say a negative return experience would discourage them from shopping with that retailer again.
This research indicates that returns are an important component in customer satisfaction and positive returns experiences lead to repeat business, good reviews, and customer recommendations.
HOW TO EFFECTIVELY WORK WITH A 3PL FOR RETURNS MANAGEMENT
DEFINE ROLES AND ESTABLISH PROCEDURES
To work effectively, it is important to clearly define the roles and responsibilities of your business and your 3PL provider. You should consider:
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Who will be responsible for what in the returns process
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What procedures should be followed when managing returns
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What tools and technology should be used by both parties
This will help you avoid confusion and miscommunication between parties and encourage seamless collaboration.
UTILISE TECHNOLOGY
Smooth, efficient returns require rich integrations with the customer’s systems to ensure the exchange of real-time data between both parties.
This allows the 3PL to receive information about returns directly from whatever supply chain management solutions the customer is utilising such as ecommerce platforms, ERPs, TMSs, and WMSs.
They will also be able to send status reports, inventory updates, and other pertinent information directly to the customer.
3PL return warehouses are often able to manage returns more efficiently and with less overhead thanks to dedicated space and trained staff, leading-edge technology designed for reverse logistics, and the power of scale, especially when it comes to shipping returned items.
ESTABLISH GOALS AND SET KPIS
Identifying any key performance indicators (KPIs) your business wants to measure, as well as how to measure them, can help you monitor the success of 3PL returns management for your business. It can also highlight any areas for improvement.
Clearly communicating these goals to your 3PL provider will also ensure they understand your business’ priorities and can support you in reaching them.
SET UP OPEN COMMUNICATION CHANNELS
Openly communicating with your 3PL provider can aid collaboration and help build up trust and rapport. Establishing open communication channels is a great way of ensuring you can work together efficiently.
Having effective communication strategies can also make it easier when problems or conflicts arise. Encouraging honest feedback as well as setting up clear channels for escalating issues when necessary can help resolve issues quickly.
MONITOR AND ASSESS 3PL PERFORMANCE
Regularly reviewing and assessing the performance of your 3PL provider can help you identify what is going well and what areas can be improved. This will help you implement strategies to optimise the returns process, making it more streamlined and less costly for your business.
WHAT ARE THE BENEFITS OF 3PL RETURNS OUTSOURCING?
A 3PL can help solve a lot of the problems that come along with reverse logistics while mitigating risk and keeping the bottom line in mind.
Here are just some of the benefits of utilising a 3PL partner for ecommerce returns management.
IMPROVED CUSTOMER SERVICE
By outsourcing ecommerce returns to a 3PL provider, your returns processes can be made quicker and more efficient.
As they take on responsibility for things like real-time tracking and communication, you can rest assured knowing your ecommerce returns are being dealt with professionally and to a high standard, keeping your customers happy.
SCALABILITY OF RETURNS
With a 3PL return warehouse, it is easier to scale up when necessary as your business grows.
If you were dealing with returns yourself, you would likely need to estimate how much space you will need months and years down the line so you can properly prepare. 3PL providers, however, can offer you more flexibility and support any necessary changes as a result of growth or setbacks.
REGULATORY CONCERNS CAN BE LEFT TO THE 3PL
3PL providers will have the expertise, specialist knowledge, systems, and certifications in place to ensure all regulatory concerns are being adhered to. This means you don’t have to worry about it - the 3PL provider helping you with returns management will do it all for you.
COST SAVINGS AND PREDICTABILITY
Working with a 3PL for returns management can result in improved shipping costs thanks to 3PL connections and the power of scale. This will help your business save on costs.
CUTTING-EDGE TECHNOLOGY AND REPORTING
3PL providers have access to sophisticated technology and reporting software that can make processing returns more streamlined. Technology can help with things like accurate package tracking, data collection, analytics and reporting.
EXPERTISE AND EXPERIENCE
Choosing a 3PL with extensive expertise and experience in returns management can help you to streamline your returns processing and ensure positive customer experiences.
FASTER RETURNS
With a 3PL provider, you can have their your returns processed in country, enabling refunds to be issued to the consumer within days, rather than weeks.
3PL RETURNS MANAGEMENT WITH SEKO LOGISTICS
SEKO Logistics provides comprehensive reverse logistics services, and we’d love to show you what we can do for your ecommerce business.
With over 150 offices around the globe, our extensive global network means we can help streamline and optimise your ecommerce returns processes wherever you are in the world.
