How to Manage Returns Effectively and Efficiently

It’s only October, and so far in 2020, shoppers already spent an additional $107 billion online compared to 2019. That’s an astronomical increase, and it indicates one thing: people are shopping differently in these unprecedented times.

Which also means people are returning differently as well.

In the traditional fulfillment model, full pallets of product were shipped directly to retailers. Now, online orders shipping direct-to-consumer (DTC) skip the retailer and the product goes, as the name suggests, directly to the consumer, introducing new complexities. Distributors now must ship to various retailers and meet their strict OTIF standards while also managing direct shipments for thousands of consumers.

Increased Returns Due to the Pandemic

A recent (and admittedly pre-pandemic) study reported that retailers often have returns rates as high as 30%. Customers are also 30% more likely to return online, while only 9% of shoppers return in-store. 

Those numbers have certainly shifted during the coronavirus pandemic. Many retailers had no choice but to lock up their brick-and-mortar shops during state-mandated shutdowns. In-store returns weren’t an option. According to another survey of U.S. residents in May 2020, more than a third of survey participants held onto a return while stores were closed.

The ability for consumers to make returns safely from their own homes is a must among the pandemic uncertainty and countries in various stages of re-opening. This means that importers, distributors and retailers within the consumer goods industry must manage and process those returns on their end.

Many of our consumer goods customers don’t manage the returns themselves. And so, they don’t have any kind of returns management process. Instead, they tend to do business with big retailers, and then those retailers handle the returns.

If they were to get an entire truckload of product and half of it is wrong, they’d likely send it all back for not meeting those OTIF standards. And in that case, the onus is on the importers and distributors.

Smaller parcel returns — a chair or picture frame or pan — are generally managed by the retailer.

Having said all that, it’s absolutely in your best interest to have a plan to process those returns efficiently.

If something comes through your warehouse door, your team needs to know the procedure for how to handle it. It’s necessary to have a strategy to manage returns — no matter how frequent or how rare — efficiently.

That kind of efficiency starts and ends with an enterprise resource planning (ERP) solution. It enables you to define and communicate your procedures and products clearly and manage your standard operating procedures (SOPs). By doing this, you’re creating an environment in which returns for anything other than customer preference are unlikely.

Understanding Why Consumers Are Returning Your Products

If you sell a product to Walmart, and Walmart sells it to a customer, that customer will return through Walmart. Though you may not be getting the product back, it’s valuable to know why the customer returned the product. Learning about your customers’ dissatisfaction enables you to satisfy your customers better. Now that you know what they don’t like, you can make something that they do like.

Similarly, if the leg fell off a stool, you want to know that that’s happened beyond the customer returning it to Walmart. That way, you can figure out if the supplier or factory has a defective product. You may need to make adjustments and corrections. You want to track damages and defects to be able to report on them. If the same stool keeps breaking for the same reason, you know there’s something that needs to be fixed somewhere in production.

Product may also be returned because something went wrong along the way. Either the address isn’t deliverable, or the wrong product went out, or the item was defective from the start. The good news is this has nothing to do with the customer; it’s all on you. Which means you have the opportunity to fix it.

Implementing Efficient Return Processes

With efficient, robust processes, you can validate and verify addresses. You can implement quality control (QC) processes to ensure you’re not sending defective items. And by employing wireless warehouse capabilities, you can scan items in and out to confirm that the order is, in fact, accurate. You can implement automation wherever possible, so there’s minimal manual data entry.

All of this is possible with our purpose-built consumer goods ERP. There’s so much functionality to support efficiency when product leaves or enters the warehouse.

This is where electronic data interchange (EDI) can offer significant benefits. When integrated into an ERP solution, EDI is a communication method that allows consumer goods distributors and their customers to exchange necessary order information (addresses, items, quantities) with customers. This is the exact kind of functionality you need to support operational efficiency within your warehouse. Without address verification, products that fail to reach the appropriate destination return to the facility with hundreds of dollars of fees and chargebacks.

When integrated into an ERP, EDI that includes address verification ensures orders are delivered to the right consumer, which helps avoid these types of returns. To survive the pandemic, businesses must adapt and acclimate to this new normal.

Customers are shopping and returning differently, so consumer goods businesses need to change their processes to support their needs.

Are you ready to manage your returns efficiently? Find out how, now.