Sunday, December 25, 2011

Holiday Returns Process Mayhem

Now that the busy holiday shopping season has ended, retailers are bracing for the returns to commence. The National Retail Federation estimates this year’s holiday returns will be $42.68bn, accounting for over 10% of all holiday sales.

For retailers, not only is the front end logistics important so is the back end. According to a recent KPMG report, in seeking to optimize supply chains, companies often time overlook customer service initiatives. In today’s economy, this is particularly of great importance. For example, the 2011 holiday season witnessed strong growth in online spending, however, according to STELLAService, Only six of the 25 largest U.S. retailers received top marks for online customer service, including website performance, between this year's November 25 Black Friday and the following Cyber Monday. Big box retailers such as Best Buy, Target Corp, Wal-Mart Stores and Barneys all experienced hiccups with their online websites during the holiday season resulting in many dissatisfied customers.

Based on surveys, online retailers have not scored as high as big box retailers in regards to returns processes.

Reverse logistics, the return/exchange, repair, refurbishment, remarketing and disposition of products, is all about customer satisfaction. In a 2010 Aberdeen study, those companies that had well developed reverse logistics programs were ranked significantly higher in customer satisfaction.

Perhaps one lesson to be learned from the 2011 holiday season is the need for retailers to improve their online reverse logistics processes. This can be done by partnering with logistics providers who offer such a solution. Not only do the large logistics providers such as DHL, Kuehne + Nagel and UPS all offer such solutions but also niche providers such as Genco and Newgistics.

In 2007, Aberdeen Group estimated US reverse logistics costs add up to about $100bn. I would venture to estimate the costs are probably that if not more today particularly as online spending continues to represent a growing percentage of total retail sales.

As retailers review their 2011 strategies, expect many of them to invest in reverse logistics programs in the coming new year. Although reverse logistics will not solve all customer service issues, it will be a good beginning to improve not only the customer's experience but also the customer's satisfaction.

Logistics providers that offer reverse logistics solutions will benefit from this retail logistics need.