When you look at your retail returns management strategy, hard cost is not the only factor to consider. SDCExec pointed out that the environmental cost of retail returns is also well worth examining.

Today we’ll look at the environmental cost of returns, some returns management strategies, and how to reduce costs in other areas like shipping, warehouse, transportation and labor.

Environmental Cost of Returns: The Facts

  • The annual cost of retail returns is ~ $500 billion.
  • Approximately 40% of returned products get liquidated or filed under “G”, creating 5 billion pounds of unnecessary trash in landfills per year.
  • Retail returns doubled in 2020 due to COVID-19 and the rapid spike in online shopping.
  • The logistical journey of retail returns is getting more expensive! Many don’t realize that products often make multiple stops along the way. Dig this… According to goTRG 2021 data, because of increased transportation costs, carrier networks are being forced to charge retailers roughly $2-5 more per item than they were in 2019.
  • The COVID19-related surge in forward-product and e-commerce returns could stick retailers with a multi-thousand-dollar bill for a single truckload. And that’s just the starting point.

Retail returns management: start with automation

SDCE says that automation is vital to returns management and optimization. Using automated fulfillment solutions that tie into warehouse management will inform staff of the best way to intake returned products, saving a great deal of unnecessary costs and touch points.

For example, when a product comes through, the system helps them quickly determine what’s best…

  • Return it to shelves?
  • Liquidate or trash it?
  • Return it to the vendor per a contract agreement?
  • Centralize the product in the returns center?
  • Resell it in the secondary marketplace? 

Without automation, a warehouse may liquidate an item that could have been re-shelved for a higher resale value. Or, they may send the product back to shelves without applying for a vendor credit that was available. Not having full visibility into warehouse management is costly:

“As a result of downstream manual decision-making processes, retailers can experience a 10% margin of error.”

Cost reduction strategies for shipping, warehouse, transportation and labor

In addition to automation for retail returns management, software designed to automate fast, accurate decisions in the warehouse will dramatically reduce shipping, transportation and labor costs. It’s well worth checking out, given that fulfillment costs make up approximately 15% of the total order value.

Manual processes for warehouse management give employees very little visibility into market conditions—such as shipping costs and vendor contracts—that have an immediate, material impact on the bottom line and the environment. On the flip side, having real-time warehouse visibility brings substantial cost reduction benefits:

For a typical e-commerce business with some wholesale, rate-shopping carrier ship methods could reduce transportation costs by 30%, while warehouse expenses are reduced by 40% from streamlined pick and pack processes and reduced shipping dimensions.

Retail companies searching for how to reduce costs should take a look at some of the omnichannel fulfillment solutions for ecommerce.

How fulfillment solutions for ecommerce work:

Innovative, advanced algorithms make it super-easy to determine the fastest, cheapest route for a shipped product at any given time—along with the added perk of reduced materials handling, transportation and labor costs, and of course, the environmental impact:

  • Incorporate item cubic dimensions, carton size and type availability, item dimensional weight calculations, available carrier shipment methods (global and multi-modal) and time in transit requirements.
  • Staff can easily select the optimal number and size of shipping carton(s) needed to fulfill a customer order.
  • Some offer services like integration to pack size and cartonization with built-in automated rules to create instant savings and the best-possible customer experience.
  • Cloud-based warehouse management solutions (WMS) that incorporate cartonization and other services are vital to businesses seeking profitable growth with increasing order volumes.

Good Reverse Logistics Sells More

In addition to financial and environment cost savings, efficiency in reverse logistics grows brand confidence and sales. (side-bar: Related Article: “The True Cost of Returns”.)

Free returns or exchanges are one of the top reasons that consumers are more likely to shop online. An efficient, scalable fulfillment infrastructure is the backbone for being able to extend – and back up – that claim. 

What logistical areas of your warehouse and returns management process can you automate to positively influence profitability right away?

  • Dimensions and weight for transportation expenses
  • Repair and remarketing costs
  • Sales velocity
  • Seasonality
  • Pricing trends

Having quick, accurate decision-making in a cloud-based WMS fulfillment system will drastically reduce your returns volume, lessen the impact on the planet, and ensure items are routed to their final destinations in the fastest, most cost-efficient manner.

More good stuff: omnichannel fulfillment for retailers

Want to accept, evaluate, restock and resell high volumes of ecommerce goods faster and cheaper – with less insult to the planet? Deposco will be at NRF Retail’s Big Show 2022 in Booth #4659. Click here to schedule a meeting.

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