How To Service Customers Through Reverse Logistics
A purely transactional approach to business will never result in customer loyalty. If you want to cultivate loyal customers, you need to care about their long-term happiness. That means thinking about reverse logistics.
- Player: Craig Plowden
- Company: Revlogs
- Position: CEO
- Esablished: 2007
- Visit: www.revlogs.co.za
Sales are important, of course. No company can be successful without making sales, but there is an important issue that is often overlooked: Customers send stuff back. The more things you sell, the more things your customers will send back. It is inevitable — just a reality of doing business.
For this reason, reverse logistics is becoming an increasingly important issue. What is reverse logistics? It's the process of picking up unwanted goods from a customer and returning them to a store or OEM.
Why can't the original delivery company simply manage the process? Well, reverse logistics is more complicated than delivery. As mentioned, items are returned for various reasons, and the nature of the return will dictate what needs to happen with any particular item.
Is it broken? If it is, you need to assess how big the problem is. Is it a quick fix, or does it need to go back to the supplier? And what if it's simply unwanted? Does it need to be repackaged, or is it still sealed and ready to be sold again?
"Around 8% of items sold are returned," says Revlogs CEO Craig Plowden. "That's a very significant number, so the way in which you deal with returns can have a major impact on your bottom line.
"When business is booming, it's tempting to move product as quickly as possible, but you need to have some sort of reverse logistics strategy in place from very early on.
"I know of companies with millions of rands' worth of dead stock just sitting in warehouses. They didn't track these returns, so they don't know why it's there. What's broken? What's ready to be sold again? Trying to make sense of it all at this stage is very difficult."
This is even more complex when it comes to e-commerce. Not only are you responsible for getting items to the customer and picking up any unwanted items, but the very nature of online sales means that returns are more likely. Customers can't touch or test an item in store, so the odds are higher that they'll be unhappy with it.
Plowden came up with the idea for Revlogs, a reverse logistics company that helps retailers manage returns, while working for a large international brand.
"We sold to large chain stores, and I was just amazed with the amount of returns we had to deal with on a regular basis. I realised that someone needed to be in charge of the process — someone needed to keep track of all these items travelling in the opposite direction," says Plowden.
Amazingly, the concept of reverse logistics didn't really exist in South Africa — at least not as an important and explicit component of the sales process.
"It's only in the last five years, or so, that things have changed," says Plowden. "When we started, it was hard to convince companies of the importance of reverse logistics. But people are catching on now. They're realising how much money is being wasted. The rise of online shops has also had an impact, since getting things returned when you're a purely digital business can be tricky and expensive."
Keeping customer happy
So, why is reverse logistics becoming such an important issue? Ultimately, it's all about customer service. Some items will be damaged or faulty, and will need to be returned, but that's not the only thing driving the growth of reverse logistics.
There's also the fact that it makes good business sense to allow customers to buy something and return it without hassle. A customer might, for example, like being able to try on several outfits at home and know that any unwanted ones can be sent back without any fear of losing money.
"As a business, you want to have a very generous returns policy. These days, you can't only take something back if it's broken. You want the purchasing experience to be pleasant for the customer, and that means giving them the peace of mind that something can be returned with ease.
"In other words, the easier the process of returning something will be, the likelier someone is to buy it," says Plowden.
"It's all about ease and convenience. If you make things hard for customers, they'll go somewhere else.
"Of course, a generous returns policy is great for the customer, but not so great for you, since you're left having to deal with the logistics of the process. To make sure that you don't lose too much money, you need to track everything. You need to know the location and condition of every item. The quicker you can get things repaired and returned, the less of an impact returns will have on your bottom line.
"Effective returns management will also result in happier customers. If you can have broken or unwanted items picked up and replaced in record time, customers will buy from you again. But leave customers sitting at home with items they don't want, and you've lost their confidence — perhaps forever."
So, how do you go about crafting a solid reverse logistics strategy? "Companies can create their own internal departments, or they can make use of an external reverse logistics service. It can seem like an unnecessary expense, but it will save you money in the long run.
"Good returns management will reduce costs, reduce admin, protect revenue, increase productivity and improve customer satisfaction," says Plowden.