Checked Your Reverse Logistics Recently?

A new report, urging businesses to improve their reverse logistics, says that
the value of returned merchandise purchased online is expected to reach an
estimated $5.8 billion in 2005, representing 90 million items.

The Jupiter Media Metrix research report contends that as the
volume of returns
increases, retailers who concentrate solely on improving the returns
processes will miss significant cost-saving opportunities.

To realize the financial benefits, Jupiter analysts said, companies must
maximize the value of reclaimed goods by improving their entire reverse
logistics systems, especially the collection and analysis of consumer data.

“Numerous outsourced solutions have emerged to address consumers’ concerns
for increased convenience and speed in dealing with returns,” said Darren
Bien, a Jupiter analyst. “While these solutions address consumers’
dissatisfactions and desires, retailers need to … focus on the cost-saving
benefits of an improved reverse logistics system that includes three key
elements: data collection, redistribution of goods and effective reporting.”

So what’s an online retailer to do?

The first step in creating an effective reverse logistics program is to
collect the data necessary to understand a consumer’s reason for the return.
Jupiter said retailers must collect well-structured and consistent data
regarding the reason for the return and the condition of the product.
Companies that fail to do this will be unable to analyze trends in product
categories and consumer segments and will be unable to reduce or eliminate
certain types of returns.

Also, companies are advised to maintain policies that treat all return
reasons uniformly, or they risk damaging the quality of the data they
collect. Why is that important? Jupiter analysts said they found that after
one retailer changed its return policy to pay the shipping cost for damaged
goods only, returns due to damage increased dramatically while ordinary
consumer behavior-related returns decreased accordingly.

“Companies need to learn more about why their consumers are returning goods,”
Bien said. “The data they collect will be the only way for them to reduce
returns, identify trends, and most importantly, quickly redistribute the
goods.”