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In focus

Written by Duncan Jefferies
21/09/2010

The rapid expansion of e-retail has contributed to the increased awareness of the importance of reverse logistics, observes Duncan Jefferies

Returning an unwanted item can be a frustrating and time consuming experience. It may require an otherwise unnecessary trip into town, or if the item was purchased from an online store, fiddling with postage and packaging. But retailers on the receiving end have it just as bad. Hundreds, thousands, perhaps even tens of thousands of unwanted goods are hurtling back along their supply chain every day.

Reverse logistics is about more than merely reusing or recycling these goods. It can help contain costs, boost the bottom line and increase customer loyalty though excellent service. But with the majority of retailers focused on making savings in their outbound supply chain, savings in the return journey can sometimes be
overlooked. “Only now when things are tightening up and retail is struggling to grow are people focusing on it more,” says Neil Weightman, sales director at iForce.
Consumers clearly want a straightforward way of returning goods brought online: either the ability to return an item a High Street store, or via a straightforward postage service.

But this is not always what they get. “E-commerce is obviously fantastic - it’s growing, everyone loves it,” says Mark Lewis, CEO at Collect+. “But there are still some pretty major pain points from a customer point of view, and returns is one of them. Sometimes they have to pay, sometimes they don’t. It typically involves having to go to a post office or waiting for a collection service, and often not at a time that suits them.”

Collect+ aims to provide an alternative service. The company was set up as a joint venture between PayPoint and Home Delivery Network in 2009 and counts retailers such as Littlewoods, Woolworths and New Look among its clients. It offers customers the choice of collecting and dropping off parcels at over 3,500 retailers, including supermarkets, corner shops and newsagents. “Convenience stores are all open very early in the morning until late in the evening, seven days a week,” says Lewis. “So it’s an incredibly dense network of convenience locations.”

Labels are included in the outbound parcel from the retailer, or can be printed off from the Collect+ website. Once the parcel is dropped off the shopkeeper scans it. The customer gets a receipt with their tracking code, and the retailer receives a daily report of what items are being returned before they arrive. “From a consumer point of view it’s a very convenient proposition, and from a retailer point of view we’re consolidating orders into collection points and giving them a tracked return service which helps them manage their own logistics.”

Retailers may not always be able to compete on price, but a superb returns system may win them customer loyalty. However unless the retailer has cross channel visibility this will be impossible to achieve. “Returns is a huge cost of retail in general, let alone home shopping, and as that proportion rises as a revenue then the cross channel functionality becomes absolutely key,” says Weightman.

iForce’s ReSCU (Returns Processing Stock Control Utility) solution is fully integrated within Tesco and produces a pre-advice file for items returned via the customer service desk PoS system. All products are processed within 24 hours of receipt into the iForce warehouse (automatically updating Tesco’s own supply chain systems) as every item is scanned and tracked within ReSCU through ‘licence plate’ accountability. “When Tesco launched Tesco Direct in 2006 we were able to adapt the system so that if you brought online you could still take it back to the store,” says Weightman. “Which is a much more efficient and cheaper way of doing things. It also drives traffic into the store.”

According to David Hogg, retail executive at Sterling Commerce, many retailers are still getting to grips with tracing and tracking items across multiple channels in this way. “At the time when somebody makes a purchase online there may be promotions active, so you need not just to be able to recognise that it’s a valid online product that was purchased from your site - you also need to know both the original list price and the promotions and discounts that were active.”

Decision time

The drive for margin has often meant more international sourcing and therefore less recourse from your suppliers with regards to returns. “If you’re a reasonable scale operator it’s your problem completely now,” says Alan Braithwaite, chairman of LCP
Consulting and visiting professor at Cranfield University. “You have to then recover it, repair it, resell it or dispose of it. And in the downturn people are fussier than they were so more goods are coming back.”

“Making the decision as to whether you can return it on site, or under what terms, or whether you’ve got to get rid of it in some other way - that’s a real skill which many retailers don’t have,” Braithwaite adds.

Products returned for a variety of reasons are often written off as faulty when there is nothing wrong with them. “The majority of the British public…when they take something back…say ‘it didn’t work’,” says Weightman, “There’s a discomfort factor in saying ‘I just didn’t like it’. Sixty per cent of what comes back is no fault found.”

Weightman believes the majority of returned items with no fault found could go immediately back into stock. “If you run your returns processing centre from your e-fulfillment centre, so that all your online shopping fulfillment is done from that warehouse, then one of the largest replenishments of that stock to sell online is actually from those returned items.”

But what about the remaining 40 per cent? “If there’s a scratch, or a piece missing, you really can repair it and refurb it very quickly,” says Weightman. “And the major brands now are selling through eBay very openly.”

The Waste Electrical and Electronic Equipment Directive (WEEE Directive) was introduced in January 2007 to encourage the recycling of those electrical items that have reached the end of their life. Retailers selling electrical and electronic goods have to ensure customers can return these items free of charge, though they are able to set up alternative collection systems as long as they are still convenient for customers.

According to Sterling Commerce’s Hogg, the WEEE Directive implementation passed off astonishingly seamlessly. He believes this was in part due to the solid returns policies many big consumer electronics companies already had in place. “They were the companies that were really hyper-sensitive to that legislation and made a big effort to prepare for it. So for the retailers, the manufacturers did the heavy lifting, which made it easier for them to adopt.”

However, he feels retailers have done little to advertise the service to customers. “The retailers never really went out of their way to promote the fact that they were actually a valid place to return used electrical goods.”

The growth of e-commerce and the economic downturn have certainly served to put the spotlight on reverse logistics, with more items being returned and retailers keen to squeeze their margins as much as possible. As iForce’s Weightman says: “The true cost of reverse logistics is coming into focus. But many retailers still haven’t got to grips with it yet.”


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