When one thinks of an E-Commerce Industry, one imagines happy customers ordering products from their homes online, receiving them at home and using them happily. To be fair, in nine cases out of ten, that is the scenario. But nobody ever considers that one case, where the customer receives a defective product. While nobody can be blamed for that scenario, it becomes the responsibility of the Supplier to reimburse the user in accordance with their policy. This can either be in the form of: Cash Back, Replacement or Servicing. This is Reverse Logistics in its essence.
What is Reverse Logistics?
Reverse Logistics can be defined as: the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal. More precisely, reverse logistics is the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal. Remanufacturing and refurbishing activities also may be included in the definition of reverse logistics.
However, for the purposes of this article, we will not be focusing on a general discussion of Reverse Logistics. However, we will discuss its applications in the E-Commerce Industry.
Also Read: Evolution of logistics- changing the game for the Indian e-commerce giants
Reverse Logistics in E-Commerce:
Consider the following scenarios:
- You order a brand new mobile phone from a website and pay online. It gets delivered in time. You happily sign the receipt and accept your package. However, you discover that in place of a mobile phone, the company has packed a bar of soap. How do you return it or get it replaced or get your money back? That is a problem of Reverse Logistics.
- You order a new dress from a fashion site and pay cash-on-delivery. It gets delivered in time. You happily sign the receipt and accept your package. However, you discover that they have delivered a dress two sizes too small. How do you return it or get it replaced or get your money back? That is a problem of Reverse Logistics.
- You order a new set of books from a website and pay cash-on-delivery. It gets delivered in time. You happily sign the receipt and accept your package. However, you discover that some of the books have a lot of pages missing, and some pages are printed in a haphazard manner. How do you return it or get it replaced or get your money back? That is a problem of Reverse Logistics.
Reverse Logistics presents a major headache for E-Commerce Industries. The major problem is that: customers spend a lot of money on buying products online, and they have a lot of expectations. Given that they cannot examine the products physically before buying, it becomes the responsibility of the company to maintain that the products they send out are flawless. If there is even one flawed product sent out, the company may get major negative publicity, and end up taking a hit on its reputation. So in case of faulty products, it becomes the immediate responsibility of the company to offer a replacement, or a repair. However, due to a lack of established framework for Reverse Logistics, companies may end up appearing negligent of their customer’s problems. Thus, companies should definitely focus on coming up with new approaches to Reverse Logistics.
Technological disruption has driven change in the eCommerce industry with shoppers embracing multiple touchpoints in their purchase journeys. Overall, there is humongous potential for the eCommerce companies helped strongly by a growing internet user base and advancements in technology. However, this will not be without its share of challenges –operational, regulatory, digital, etc. A company’s ability to prepare itself proactively to meet these challenges will decide the difference between a successful venture and a failed one – Sandeep Ladda, Technology Sector Leader, PwC India
Why does E-Commerce need Reverse Logistics?
- Brilliant Marketing Strategy: Some studies show that Reverse Logistics offer a better way of attracting customers. In developing countries like India, where people are still sceptical about online shopping, a smooth reverse logistics programme gives them the confidence to invest their money in your business.
- To keep customers: Once customers have started using a service, the next step would be to keep them faithful for as long as possible. The best way to keep customers satisfied would be good customer service. This can be achieved through efficient Reverse Logistics.
- Cost effectiveness: If done properly, Reverse Logistics can decrease return processing costs by around 25%, increase productivity by a minimum of 10%, increase consumer satisfaction and faithfulness by a lot, and increase net profits by 2-5% and will reduce wastes at the same time.
In India, only a handful of companies offer dedicated Reverse Logistics. Some examples are: New Delhi based company RT Outsourcing, Kolkata based company Aforeserve.com Ltd and Yantra Solutions Pvt Ltd, which is the Indian branch of the American company Yantra Corp. However, the market of Reverse Logistics in India is booming. Recently, a Bangalore-based Start-up called Blubirch received 2 million USD in funding from angel investors, such as Chicago Capital Ventures, Sanjay Mehta, and others. They work as an independent end-to-end solution provider for Electronics and IT reverse logistics. The company has witnessed a booming growth in both business and user base.
In short, the problem of Reverse Logistics is one which is by no means solved in India. What the industry needs is for a company to take the lead through a groundbreaking innovation in the field. When we look at big corporates like Amazon, eBay, Wipro, they have their dedicated Reverse Logistics departments. Hiring third party solution providers may be an option but it is generally expensive and not fit for start-ups. Needless to say, the future of Reverse Logistics looks bright, but the motto of all companies should be: Strive to not give customers a chance to return!
