With e-commerce becoming a lucrative shopping channel, retailers and their logistics partners have been primarily focused on how to quickly move goods through the supply chain and into the hands of consumers — a process commonly referred to as forward logistics. However, the opportunities presented by the growing popularity of e-commerce also come with a challenging, multibillion-dollar downside: the rapidly increasing number of returns.
Return rates for e-commerce purchases are between 25% and 30%, compared with just9% for in-store purchases. Turning reverse logistics — the process of returning goods from end users back to their origins to either recapture value or properly dispose of material — into a costly and high-stakes matter for retailers.
Not only are retailers experiencing more returns as a result of e-commerce growth, but consumer expectations also demand that retailers provide a seamless process. In fact, 92% of consumers agree that they are more likely to shop at a store again if it offers a hassle-free return policy (e.g. free return shipping labels). Some consumers even place large orders with the intention of returning certain items.
And e-commerce sales are only going to continue to increase, exacerbating the issue and making retailers’ need for help more dire. However, for logistics firms that can offer cost-effective reverse logistics solutions, this has opened up a significant opportunity to capture a share of rapidly growing e-commerce logistics costs in the US, which hit $117 billion last year, according to Armstrong & Associates, Inc. estimates.
Reverse logistics so much more challenging than forward logistics, and consumer trends have driven retailers to finally improve the way in which returns move through their supply chains, and how logistics firms can act to win over retailers’ return dollars.
E-commerce is now a core shopping channel for retailers, and it’s still growing. US e-commerce sales are set to increase at a compound annual growth rate (CAGR) of 14% between 2018 and 2023, surpassing $1 trillion in sales. Booming e-commerce sales have driven product returns through the roof. It is estimated that US e-commerce returns will increase at a CAGR of 19% between 2018 and 2023, surpassing $300 million dollars.
Consumers have high expectations about how returns are handled, and retailers are struggling to find cost-effective ways to meet their demands. Sixty-four percent of shoppers stated they would be hesitant to shop at a retailer ever again if they found issues with the returns process. And retailers don’t have the expertise to effectively keep up with how demanding consumers are about returns — 44% of retailers said their margins were negatively impacted by handling and packaging returns, for example.
Logistics firms are well positioned to solve — and profit from — returns. These companies can take advantage of their scale and expertise to solve pain points retailers commonly experience as goods move through the reverse supply chain.
Reverse logistics solutions themselves present a lucrative opportunity — but they’re also appealing in the potential inroads they offer to supply chain management. The global third-party logistics market is estimated to be valued at $865 billion in 2018, according to Bekryl.
A recent study found that the average American walks about 900 miles a year. Another study found that Americans drink, on average, 22 gallons of alcohol a year. That means that, on average, Americans get about 41 miles to the gallon! Makes you damned proud to be an American.