Is reverse logistics hurting e-commerce business?

Of late, to make their business a viable proposition, the e-commerce firms are leasing infill distribution centers in order to reach the products to the end-user in the shortest possible time.  But, receiving and storing returns have become a costly and painful affair.  The success of an online business depends on the speed of delivery. In fact, this factor has become so critical that online retailers are leasing up infill industrial centres, triggering vacancy rates to abysmal lows. While the online retailers keep their best foot forward to ensure speedy delivery of products to the consumer’s doorstep, to their misfortune, returns are increasing on the reverse logistics side like never before. The online retailers are in a quandary to find a solution to this issue, which is really draining away their profit margin.At present, if the online retailers are to survive the competition, they need to receive the returned products by spending more money for the postal and transportation charges. The moment any of these online players attempt to put a cost on the return of goods, the company can shut shop within no time. The new generation online shoppers are a finicky and pampered lot. With large disposable incomes and away from the clutches of parental pressure, they take spot decisions. The moment they see there are any hidden charges involved in the return of products they purchased online, they will simply look for another online player who is offering to take back the canceled product without any cost. So, practically, the online retailers are in catch 22 situations.

Kurt Strasmann, Senior Managing Director, CBRE says the way the online retailers handle returns is a costly function. Therefore, it has become a major challenge. He admits that it is a big drain on the bottom line of his business. Going forward, he says the reverse logistics will have to change.At present, the online retailers bear the cost of postage as well as handling upon return. In order to mitigate the burden on online retailers, the free return policy should evolve soon, Stransmann feels.“Eventually, there will be a different policy on the return side.  Currently, the customer can return the product for free, and I think that will evolve into either a cost to return the product or a different price between return and non-return”, Strasmann pointed out.Although, the online retailers generally endorse Strasmann’s views, but to do away with the free return policy cannot be implemented anytime soon. Now, what the online retailers are trying to do is to perfect the initial delivery and speed of delivery. More issues are at hand like the solving for the last mile and further finding inner city facilities that house the flow of products.Strasmann says that for the commerce websites, there is a fine line between the speed of delivery and cost of service. More facilities opened and for faster speed of delivery involve more expenditure. So, it is a question of balancing act. What the online shopper wants right now is the speed of delivering the goods.According to Strasmann, while the delivery logistics is constantly evolving, reverse logistics is bombarded with questions, such as what do retailers do with the product when it comes back; where do they store it; and how do they resell it. “That is a really big issue. In some cases, the item comes back and needs to be handled from a human resources standpoint, a storage standpoint, and sales standpoint and whoever figures out the answers to those questions first will be a big game changer”, adds Strasmann.