Raghav Sibal, Managing Director Australia and New Zealand, Manhattan Associates, sits down with MHD to reveal how record growth in e-commerce has changed returns management.
The 2020 pandemic will soon be marked in history as the gold rush era for global e-commerce operations. Data can’t keep up to the same speed as order volumes, with most major Australian retail brands experiencing an online growth rate of at least 60 to 80 per cent. Myer reported an 800 per cent overall growth in e-commerce sales during its Easter sale, and now into the second half of this year, extraordinary order volumes continue to soar.
There has been a heightened emphasis on external order fulfilment from logistic hubs due to the surge in online shopping, but how are companies coping when a record amount of orders are being returned?
Reverse logistics is part of an organisation’s integrated supply chain management. It’s one of those areas in operations that companies put to one side because it’s really difficult to get right. However, this is the year of accelerated digital shopping and organisational transformation, when the need for a stronger returns policy was put in place by many retailers following extreme order fulfilment during COVID-19.
Raghav Sibal, Managing Director of Australia and New Zealand at Manhattan Associates says that traditionally in western markets when customers make a purchase from a physical retail store, they have always had the opportunity to go back and return their goods. “With the onset of e-commerce, returns have now become a big factor as part of omnichannel retail, turning what was once a fairly low returns market into a major part of retail operations,” he says.
The age of free returns
“Eighty per cent of returners are considered to be the best customers a brand can have and 95 per cent of their loyalty is driven by a seamless returns process,” Raghav says.
The reverse logistics market was already anticipated to grow substantially this year, owing to adoption of blockchain technology in the logistics industry. The major driver of the reverse logistics market is the expanded e-commerce industry, however despite this need, inventory management is one of the most underinvested areas in retail.
Free returns are a particularly valuable tool for items with high return rates, such as apparel. In a study from Doddle, 72 per cent of Australians will check a retailer’s return policy before committing to a purchase. Moreover, 42 per cent of Aussie shoppers said they would stop shopping with a particular brand if they’ve had a bad returns experience.
Raghav says consumer trust is paramount to the ongoing success of any retailer. As of April, 44 per cent of the top apparel retailers now offer free returns. E-commerce retailers such as Amazon.com have extended their return policy windows, with some online retailers like ASOS advertising free returns on its website.
“There is no such thing as free returns though, it’s built into the price point of supply chain operations. Given the proven success of free returns, it’s typical now that the consumer isn’t incurring any shipping related costs and it’s up to the retailer to facilitate those fees instead,” he says.
Streamlined returns process
Raghav says having a streamlined returns process is of utmost importance for any retail supply chain. So, what are the tools and capabilities required to offer consumers a seamless digital returns experience with an instant credit option to encourage a near-term purchase?
He believes the first thing companies have to ask themselves is how they can make returns easier for the customer? “The last thing a retailer wants is parcels arriving at its distribution centre without any knowledge as to why it’s arriving back, with no prior authorisation or information from the customer,” Raghav says.
Taking authorised information from the customer, including the initial purchase price through communication via a call or email, or established website portals, will commence the streamlined process. Raghav says capturing information prior to the goods being physically returned will ensure current data and a smooth-running supply chain is maintained, despite outbound influxes of order fulfillment.
Following first communication, the return point can be established, whether that be the distribution centre, 3PL for returns only or a physical store. Raghav says if goods are being returned to the warehouse, the warehouse management solution needs to have all the capabilities and flexibility to process returns through automation. “The next question companies need to ask themselves is how returns will interact with outbound or other operations occurring in the warehouse, and how will they be handled differently?” he says.
Raghav encourages retailers to assess their inventory and establish whether stock can be recycled and re-sold, or if goods will go back on shelves if they are returned to stores. He says there should also be a place in returns management for damaged or faulty items that need to undergo further assessment, but Raghav says at the end of the day, no matter where any variety of return points are located, different technologies and tools must be available across the supply chain.
“Able planning of returns is absolutely critical; it is a labour-intensive process to manage returns at the warehouse as items need to be categorised and turned into something that can be resourced again as inventory stock,” Raghav says.
That is why advanced notification of returns is important. Once the returned goods arrive at the warehouse, it’s about joining the non-stop flow of goods. Raghav says a streamlined management process of both outbound and returned goods is only achievable with an efficient warehouse management solution.
“We are finding our clients are driving their own returns policy depending on the size of their operation, and most are adopting shopper-friendly policies. Our warehouse solution has capability to manage their returns process because it captures all the accurate real-time information that helps to provide a frictionless returns experience,” he says.
Raghav says there is a trend for inviting customers to return goods to stores too, as it’s less labour intensive and cost effective, whilst also having the added advantage of getting customers in store again, which can lead to additional sales.
“We have solutions that facilitate in-store returns too. Digital applications that allow returns via mobile devices are proving to be a huge success, emphasising the importance of a streamlined return process across our retail client base.”
Future of fulfilment
Raghav highlighted that technology is driving both traditional retail and e-commerce operations, and retailers are becoming creative with the ways in which they are enhancing fulfilment capabilities.
“Many retailers found during this period that just meeting the increasing e-commerce demand at fulfilment centres wasn’t good enough. Kmart converted select stores into dark stores to ramp up fulfillment and we can expect this drive in volume to continue,” he says.
Raghav says omnichannel presents a channel of opportunity for retailers. “Click and collect and shipping from stores will become the norm for major retailers, which is why reverse logistics has to constantly evolve with the changes in fulfilment capabilities,” he says.
Making the returns process harder or less attractive for the end consumer means doom and not boom for the retailer. Raghav says companies who still believe that reducing returns is a smart move, need to realise they’re actually missing the mark.
“Returns have always been a very acceptable and integral part of e-commerce operations. It’s now the break in the water for retailers who are experiencing an explosion in online sales, and who are realising customer satisfaction and loyalty is more important than a challenging returns process,” Raghav says.
He is adamant that although there are new technology capabilities that are available, reverse logistics is not a new concept for the market. Raghav says major brands including Nike and Adidas have had sophisticated returns processes in place for years, but due to logistics facing some of the biggest changes in response to the pandemic, seamless return operations are now the only way forward.
“Companies can’t fight the fact that there will always be returns, but a planned digital strategy will ensure a more streamlined and cost-effective returns process for both the consumer and retailer.”