Originally posted in Supply Chain Brain, Oct 4 2023 by Robert J. Bowman.
Who should pay for returns — brands or customers? Pavan Mahtani, general manager of returns with Veho, explains the complications that arise from the management of returns, along with solutions that can mitigate the cost for all involved.
Over the years, retail and e-commerce supply chains sought to become increasingly optimized, with a focus on forward logistics. The tendency left reverse logistics — specifically, customer returns — “in the dust,” Mahtani says. Returns were viewed as a “necessary evil” and onerous cost center, causing retailers to make the process a difficult one for customers. But that “intentional friction” caused an erosion of customer trust, leading buyers to procrastinate in sending unwanted items back. Retailers suffered because they couldn’t resell items within the extremely short windows in which they were still in demand.
To minimize the problem, “brands have tried to make returns hard,” Mahtani says. “But they’re here to stay.” The last few years saw a tripling in the volume of e-commerce returns, and the trend is likely to continue in the years ahead.
Rather than making returns painful for the customer, retailers should be figuring how to make them easier, Mahtani says. “Take friction out of the process.”
The idea of a liberal returns policy is to give the customer confidence, he says, and to ensure repeat business. By contrast, surveys show that three out of four customers won’t shop with a brand again if they have a single negative returns experience.
The rewards to a retailer for making returns easy are great, Mahtani says. Customers that order the most amount of product can be more than four times more profitable to the brand in the long run, and their desire for a frictionless returns process should be accommodated, in the form of preferential treatment.
