Reverse Logistics Can Make or Mar Ecommerce Businesses

Effective Reverse Logistics Management Is Crucial for Customer Delight

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When one thinks of e-commerce, one often focuses on the cycle that culminates in delivering goods to the customer. But there is an entire leg of the e-commerce supply chain that comes into action after goods are delivered. Enter the world of "reverse logistics." While we read a lot about the consumer-facing side of e-commerce, the underlying fulfillment backbone isn't usually in the limelight.

There are several reasons that make reverse ​logistics inevitable. Here are some of the most common.

Returns: Some goods are invariably returned to the seller. It is true in physical retail as well as in an e-commerce setup.

Mis-Delivered or Undelivered Goods: If you are an e-commerce player selling virtual goods that can be delivered electronically, you might be blissfully ignorant of the nightmare of misdelivered or undelivered goods. But physical goods not reaching the desired destination is a common problem that e-commerce merchants have to grapple with.

Damaged Goods: Ordering a brand new iPad and receiving one that has a cracked body or a scratched screen is unacceptable. But it is bound to happen sometimes. Such damaged goods get returned by the customer or the logistics provider.

Malfunctioning Goods: "I received the pottery wheel, but it refuses to spin" is the last thing a successful e-commerce business wants to hear. But since 100% error-free performance is impossible, there will be occasions when goods will not work. It is not exclusive to e-commerce; it happens in physical retail too.
But a customer who physically collects goods at a retail store finds it logical to travel back to the store to return the malfunctioning goods. In e-commerce, the customer would prefer a pickup from her location or at worst an option to mail in the malfunctioning product.

Exchange Programs: "Give us your old and obsolete gizmo and get the latest model" is a slogan that finds appeal with many. Several customers refuse to upgrade, as they are unwilling to trash a perfectly fine, albeit old, product.
Exchange offers are compelling for the customer, but they create the additional process of collection of goods for the e-commerce business.

Why Reverse Logistics Is Important

If you have read the above list closely, you know that there is no escaping reverse logistics. Think of reverse logistics as more than merely a necessary evil.

Here are some of the reasons why reverse logistics is so important to an e-commerce business:

  • As a Strategic Advantage: Though the e-commerce enterprise is quite complex, customers have only two clear windows into the business -- the website and order fulfillment. If either of those two is found lacking, the customer will lose the confidence necessary to make a purchase. Reverse logistics is an important part of order fulfillment. Hence a strong reverse logistics setup can be a strategic advantage to an e-commerce business.
  • Customer Retention: In much the same way as reverse logistics can act as a strategic advantage, it can also help in customer retention. A customer who can return or exchange with little pain is likely to be a satisfied customer. And a satisfied customer is likely to be a customer for a long time.
  • Regulation Compliance: When reverse logistics results in damaged goods, it leads to waste. And there are regulations relating to waste, especially e-waste. It proves that reverse logistics is not just about customer delight; it has to do with aligning oneself within the legal environment of business.
  • Profitability Through Asset Recovery: If your e-commerce business does not have a sound reverse logistics plan, it is probably losing out on the golden opportunity to profit from the piles of goods that fell out of the ​supply chain. In an era of wafer-thin e-commerce margins, effective reverse logistics could be the difference between being profitable or not.​
  • Shareholder Value: As a manager of an e-commerce business, you know that it is your fiduciary responsibility to deliver value to shareholders. So you need to cash in on the multiple opportunities that reverse logistics provides.