Product Return and Recovery Management

Jun 11 2021

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Accion Performance is here to help your business navigate through the challenges of the ecommerce boom that is continuing to happen. We are here to help you take in the large volumes of returns that are coming in the next few months and ensure improved results with the increased capacity. Click to talk to our team today!

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Product Return and Recovery Management

Product return is considered as one of the biggest challenges in the e-commerce business globally. The retailers do not realize how much profit they lose on product returns. The product return rate definition as of 2021 points towards hidden costs. It takes a lot of time for the people in the industry to realize how cost-ineffective product returns are. For retailers, product return is considered as which cost the shops will incur, product return and recovery management aims at reducing the cost for the retailers and increasing the convenience for the customers.

The product return process for the customers has to be both efficient and effective. For most retailers, the process involves filing a product return form and have the products shipped back to the stores. Even better, some stores provide pick-up for the return goods. However, the process is a bit more complicated for the retailers. The process is time-consuming and costs so much for them.

According to the product return rate analysis of 2020, product returns are estimated to cost the business 550 billion dollars. It is worse if the business is online-based because the cost jumps up to 25%. An analysis of the business reveals that 47% of customers prefer not to buy an item if they will pay for its return. Regardless, 20% of online stores still raise their prices to cover the return costs.

Return costs cannot be completely avoided but proper management can reduce the cost while improving customer experience. The process requires the shops to point out what causes the returns in the first place. The reason behind the return will indicate the solutions in form of a product return rate formula that will reduce loss of revenue while keeping the customers happy.

Flipkart has been a trendsetter in the product returns process for quite some time now.

The product return process in Flipkart allows customers to start the return process online. On their website, you can begin the process by clicking on the tab "return". This will create a return request. You can then select your reason for return and based on your options you can choose to have your product exchanged for an identical product with a different size or shape or have it replaced with an identical product for reasons such as damage or breakage.

There is a third option. You can choose to have the product returned and a refund is given to you. This is a scenario where the product of your choice is not available or it is not available in the preferred size or color. Some customers may choose to buy the item from a different store. The retailer will issue a refund for such cases.

All retailers will put the product you wish to return through a verification process. The process checks for tampering, adulteration of swaps of the products. The process protects the retailers against fraud. The company will then confirm your decision to return the item.

For a successful return process, the retailer will require you to place all the items together and ready all necessary documentation. The necessary documentation includes price tags, freebies, accessories, invoices, and original packaging. If the request meets all Flipkart's returns / replacement policy you will receive a goods return note showing all the details for the next process.

Journal entry is important to keep track of all returns management solutions, especially refunds. When goods are returned, the sales accounts are debited to reduce sales. The accounts receivable is subsequently credited to reduce what the customers owe. An entry is then made to debit inventory to return the items to the store. If carried out efficiently, inventory and journal entry generate a high value from returned goods provisions.

Due to the tedious and long returning process, retailers often seek the services of third parties. The third parties conduct the entire return procedure for the retailer who in some cases has no experience with product return processes. Another reason for a retailer to outsource product return processes is lack of capacity. The returns management system entails a lot of preparation. For instance, the staff has to be trained in the product return process.

This is a process that requires full-time managers who will be in charge of product returns management. The managers can offer formal and informal training for the staff involved in that department to learn the logistics involved in the returns management process.

A general rule is that companies that have the best returns processes are the ones with full-time managers for this type of activity. Also, the best companies provide formal and informal training for staff. Having competent staff promotes efficiency. However, efficiency in processing returns does not always work. The process must incorporate aspects such as speed. The speed of service delivery provides a higher probability of financially valid reuse options. The longer the time it takes to process the return goods, the more is lost.

The return process is not very complicated but it is a series of steps, each important for a successful product return. If the process could be laid out as a customer returns process flow chart, it would look something like this; pre receipt where the retailer receives a return request, receipt of the returned items in a centralized station, sorting out of the items, support, analysis of the condition of the items, and finally the processing of refunds, exchanges or replacements.

During the initial stage of the process, theproduct returns are received in a warehouse or a distribution center. The warehouse returns process begins with the acknowledgment of the returned products. The returns process in the warehouse kicks off with the sorting of the items. The products are sorted along with various categories, for instance, how the products were packaged during the return. They can be further sorted along the line of the type of return based on the labels, addresses, size, or number.

The items returned are separated based on the stock-keeping units or inventory return process. Then the specifics divide the returned products further, such as the reason for return. When the products are sorted, the refunds can begin at this stage. However, the refund stage may differ depending on the company and the policies.

The returns process flow moves on to the processing stations where the personnel processes the products by the order they arrived. They consider the type of product, physical size, position, or customer. At this point, the personnel also separate the accompanying documents from the products. The personnel prioritizes various characteristics over others depending on the metrics and standards of management.

The eCommerce returns process aims at how to reduce returns in e-commerce. One of the most efficient strategies is to identify the pattern in the returns and exchange of goods. This provides a lot of information on the type of product returned and the reasons they get returned. The data is drawn from the disconnection between the products and the customer expectations.

Ecommerce return rates in 2020 rose 70%. The alarming trend can put retail stores especially the online-based category out of business. To reduce the return the industry turned to pattern analysis. Looking at the patterns the retailer can discover the most returned products and understand the reason behind the trend. The sores can correct and adjust the products to match the customer expectations and reduce the number of product returns, thus, reducing the cost of returns to online retailers.

The management process aims to promote efficiency, reduce costs and increase customer experience. To address the problem from all angles, it is going to take more than one action. The industry has taken on returns management best practices, which are practices meant to benefit both parties.

First and foremost, make it easy for the customers to understand the process, this should be highlighted properly on the company website. To reduce returns be honest about the conditions of the products and expectations. When the customer wants to make a return, give them the required time to return the item. Last but not least, scarp return fees if possible. 49% of customers report that they would buy more items if there were no return fees. This action will place the name of the company in good graces while reducing the number of product returns.

Other returns management strategies have proven to be efficient in various returns management companies. For instance, enabling the returns management department to promote convenience by communicating your return policy to your customers promotes easy returns. Increasing store credit refunds is also another strategy that cuts down on cost while still making a sale.

Most importantly, capture real-time data from your customers. Finding out the trends and patterns in the return of goods provide insights that help improve inventory decisions. Adjustment of the inventory purchase decisions reduces losses and discounts that result from returned products. Last but not least, retailers should invest in reverse logistics such as predictive restocking. Predictive restocking has changed the whole returns management definition. Now, retailers will be able to meet customer expectations and thus reduce returns.

The Sap sales return process proves the best example of how to handle product returns. It is easy to explain the returns management process by looking at the process outlook. Sales returns processing manages products returned due to complaints from customers. The product is entered into the system and analyzed. A successful analysis determines if the product can be used. Depending on the order return rate, the process can reduce the cost involved in the process.