BI Intelligence
When products are returned to a merchant, the merchant faces the costly process of either repurposing, reconditioning, or recycling the good.
This multi-billion dollar problem is referred to as reverse logistics and it can cut into retailers profits by 10% to 20% every year.
This problem will be even more exacerbated by the rise of e-commerce, as customers increasingly ship back goods to the retailer, who often might pay for the shipping costs.
In a new in-depth report from BI Intelligence, we examine reverse logistics and discuss how retailers can take an omnichannel approach to help reduce the costs they bear from returned goods. In particular, the report examines the strategic reasons why retailers should implement a reverse logistics function and discusses the industries that are most at risk.
Here are some of the key takeaways from the report:
- The rise of e-commerce has increased the need for an effective reverse logistics solution. E-commerce will account for 10% of total retail sales in 2018, up from 7.8% in 2015, according to the US Census Bureau. Shoppers are more prone to returning items purchased online because they aren't sure exactly what they're getting.
- There are four types of returns retailers face: commercial returns, product recalls, repairable returns, and end-of-life returns. Each requires a different reverse logistics cycle to handle it effectively.
- Retailers can reclaim up to 32% of the total product cost by having an effective reverse logistics function. This includes by reselling the product, recycling it, remanufactuing it, and more.
- Retailers should take an omnichannel approach to reverse logistics. However, this will only work if the retailer has all their systems integrated and thus can track online and offline purchases in the same system.
In full, the report:
- Explains the intricacies of reverse logistics
- Examines the cost associated with reverse logistics
- Analyzes the effect returns will have on reverse logistics
- Discusses the best practice approach retailers can take to reduce this cost
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