Dive Brief:
- Of the three options for returning unwanted items — return to store, return to distribution center (DC) and return to a third party — return to store is generally considered the cheapest option for retailers. It’s also the method most preferred by online customers, with 60% choosing this option when available, AlixPartners reported.
- Although returns to store allow for the fastest resale option of returned goods, the processing time required from employees often means short-staffing other departments where sales will be accordingly delayed. Hiring more staff to assist in returns is also expensive.
- DCs can be slow to process returns, while 3PLs can be costly. Neither are as quick at turnaround as in-store options, though 3PLs come closer than DCs.
Dive Insight:
Labor intensive in-store returns versus pricey 3PLs prove a challenge for retailers.
A study conducted just in advance of peak season revealed that even millennials prefer in-store returns, regardless of where the purchase was made. Yet because the rate of online purchases returned to brick-and-mortar stores is imbalanced, the burden on stores is heavy, leading to reverse logistics solutions that may or may not ultimately pay appropriate dividends for the price.
The store obviously plays a critical role in returns management.
Carly Llewellyn
Senior Director of Marketing and Communications at Optoro
Retailers should therefore carefully consider their methods. "The biggest factor is strategic. What’s the role of your store? Is it a showroom, a traditional brick-and-mortar outlet or an omnichannel hub? Retailers that operate their stores as showrooms or more traditional brick-and-mortar outlets need to have DCs play a larger role," Pete Madden, director of AlixPartners LLP, told Supply Chain Dive. "Alternatively, stores with omnichannel capability – selling to walk-in customers as well as offering Buy Online, Pick-Up in Store (BOPIS) or Ship From Store (SFS) options have more factors to consider with returns."
One logistics service provider offers another take on the matter of returns. "We have seen retailers focus on improving their returns process as part of a broader effort to create better experiences across the entire customer journey, " Carly Llewellyn, senior director of marketing and communications at Optoro told Supply Chain Dive. "Some retailers report as much as 90% of online returns happening in stores instead of through the mail, so the store obviously plays a critical role in returns management."
She cautions against a one-method-suits-all philosophy, however. "There is no silver bullet. What we have seen is that retailers are investing in technology solutions that can support both in store and DC returns management."
"Everyone is looking to improve returns management in all locations. Forward-thinking retailers have identified the stores as a priority for improvement, because there is a huge opportunity to minimize costs across the network and get to the optimal disposition the fastest," Llewelyn concluded.
