Zara has joined Next, Uniqlo and others in starting to charge customers who return items online. The policy has created some controversy from shoppers who have become used to free online returns, but brands argue the charges are necessary due to the spiralling cost of reverse logistics. Zara and Next aren’t the only ones. According to the Reverse Logistics Association (RLA), many other companies are also struggling with online returns.

The RLA recently published the results of its first quarterly returns management survey. This showed that over half of survey respondents were experiencing increases to the cost and volume of returns and expected the trend to continue. The problems are the result of rising transportation and warehousing costs plus capacity limits within supply chains, all of which contribute to the higher costs in returns management. Boohoo recently cited soaring return rates as being a hindrance to its full-year profits. Mintel, the consumer research specialists are expecting more brands to follow the lead of Zara and start charging too.

Ever since the Covid pandemic began, volumes of online orders have continued to rise, and if more sales are being generated, higher rates of returns are inevitable. For e-commerce companies, physically processing the volume of goods being returned to minimise the time between them coming back to the warehouse and then being available for re-sale again, can be a constant battle.

In some industry sectors, especially fashion and footwear, something like 30% of items shipped from the warehouse are returned, as consumers order multiple colours and sizes to try at home. It’s so convenient why wouldn’t you? Aside from the administrative burden that processing high levels of returns creates, incoming items need to be quality checked and returned for sale as quickly as possible, to avoid missed re-sale opportunities. This was one of the challenges highlighted by Zara and why traditional returns into the company’s stores are still free.

Automating with a WMS

Technology is key to making an established warehouse returns process more efficient. Delays arise because for the majority of items, goods have to be physically quality checked to ensure they are fit for resale and then checked back into the supply chain as stock that is available to buy. This is both time consuming and resource intensive.

It is especially important for fashion and homewares businesses, which have distinct seasonal ranges and a short shelf life in which to maximise sales values to have an efficient reverse logistics process. Using a Warehouse Management System (WMS) means that products can be booked back into the inventory system centrally and are then instantly visible as available to buy. This also needs to happen independently of other warehouse processes so that the management of returns complements rather than interferes with daily warehouse operations. Indigo WMS offers intelligent identification, stock receipt, and relabelling functionality. This ensures returns stock can be relocated efficiently using flexible rule based processes, saving a huge amount of time and effort. It is an essential part of every warehouse management operation.

Outsourcing can be another good option for retailers too, because processing returns is a distraction away from the daily business of sales order processing. Having a dedicated partner to take care of everything and from where items re-sold can also be shipped onto customers, can be an efficient solution. It’s especially useful for fast fashion retailers or for brands who have an outlet store comprising past season’s ranges and want to keep these items separate from the main warehouse.

Indigo’s supply chain consultants have real-world experience with reverse logistics management and can help you to improve your logistics and warehousing operations.

Contact us to see how we can advise you and help you run a more efficient and profitable warehouse.