The business case for making your supply chain sustainable
This instructional article makes a business and environmental case for sustainable reverse logistics techniques in retail. It offers current research, real-life case studies, and tips that other forward-thinking brands and retail locations can use to enrich the returns process for their business, shoppers, and the planet. It originally appeared in Reverse Logistics Magazine.
Consumers’ traditional dislike for returns is well-known, and the resulting business impact is intuitive. Over 87% of shoppers are unlikely to buy again from a brand after a poor return experience, and 75% feel returns are the most painful part of buying online. What’s less understood is how conventional supply chain processes impact the environment, while also accumulating costs that deteriorate profitability.
This article presents a business case for eco-friendly reverse logistics techniques, based on the latest research and case studies. It offers a blueprint forward for environmentally-conscious brands and retailers who also care about their market share, bottom line, and shopper experience.
The green elephant in the room.
Brands and retailers that individually process returns with traditional materials create a packaging problem for their business, shoppers, and the planet. The implications are larger than many understand.
The costs of individual shipping and handling. Today, 165 billion packages ship in the U.S every year—many in individual boxes made of unsustainable materials. Shoppers return or exchange up to 40% of products they buy online, and exchanges account for another 18% of refund transactions. Those rates swell 12.5% during the holidays, when nearly half (46%) return products the week after the holidays alone.This high return and exchange volume has implications for retail costs and the planet. Boxes returned individually are often made of disposable materials, and nearly 40% of customers buy new packaging when returning. This environmental burden increases when boxes are packed and shipped inefficiently inside trucks, often with unnecessarily high carrier rates.
On average, brands overspend up to 20% on reverse logistics.
Until these inefficiencies and waste are addressed, misused costs will only grow; analyst predict retail sales will grow at least 4% every year and eCommerce by 15% until 2023.
Is cardboard better for the environment after all? Controversy swelled when an organic farm shared its intention to reduce its carbon footprint 70% by switching from paper and cardboard to plastic materials. Two years later, commissioned and other research showed that paper and cardboard actually create more greenhouse gases than their plastic counterparts over a package’s lifetime. The cardboard footprint of unsustainable reverse logistics also has implications for trees. Over 1 billion trees are cut down every year to create the 165 billion packages that ship.
Recycling may actually route to landfill. Recent international legislation changes call a common counter-argument into question: that cardboard can be recycled. In 2018, China banned certain types of paper and plastic as part of an anti-pollution campaign. It also tightened standards for recyclable materials that it accepts. One requirement is materials like cardboard and scrap metal must be 99.5% pure. Even a small amount of undetected rubbish, such as food scraps, can ruin a batch of recycling.These sanctions impact at least one-third of the 66 million tons of material that American consumers and brands recycle annually. Often, these materials include cardboard boxes that are only used once. Instead of routing to China, many exports actually go to landfill.
Traditional reverse logistics processes set the environment on a journey to the bottom. If nothing changes, the fashion industry will consume a quarter of the world’s carbon budget by 2050. That same year, there will be more plastic than fish in the sea.
What’s equally sobering is how much inefficient reverse logistics threaten retail profitability—even beyond wasted costs:
80% of buyers expect businesses to look beyond profit, and 61% only buy from brands with sustainable business practices.
Retailers that don’t make how they ship, process, and disposition their returns and exchanges sustainable risk customer attrition.
A new solution
These facts and trends aren’t news to most retailers. While some dismiss these challenges as the cost of doing business, a growing majority embrace reverse logistics as a strategic opportunity to make their supply chains sustainable—while reducing costs, retaining revenue, and giving shoppers choice.
Industry leaders reimagine reverse logistics in three ways.
1. Initiate returns online.
Online return and exchange software has minimal environmental impact, and increases exchanges and customer loyalty to boot. These fully-branded, customizable solutions lower retailers’ net return rate, and therefore retain revenue with intelligent suggestions for one-click exchanges based on the return reason provided. That’s huge when you consider over half (52%) of returns are made because of a size or color issue.
Of course, this functionality is also good for business; it allows brands to retain maximum revenue. For example, after switching to a best-in-class solution with this capability, Draper James boosted conversion, order frequency, and exchanges. Rothy’s increased exchanges 33% when itdid the same.
2. Offer sustainable shipping options
Existing reverse logistics expose brands environmentally. Shoppers hate printing return labels, cobbling together (beat-up) boxes, and paying for returns. They feel hassled when companies make it difficult to make returns, and force them to make yet another trip to ship back products they already don’t like. While it’s no wonder that returns have such an impact on customer satisfaction, retention, and loyalty, the real question for brands that aspire to be sustainable is: do you really want to leave your commitment to sustainability in your shoppers’ hands?
Leading retailers optimize reverse logistics by giving shoppers sustainable choices in how to return—often in their hosted online return flow where dynamic displays offer return methods based on shopper zip codes. They include:
In person. An increasing number of brands now accept other brands’ returns. The option isn’t just a strategic way to acquire new customers; it’s also eco-friendly and cost-effective. Shoppers travel shorter distances to nearby locations, saving on transportation and materials with box-free returns and exchanges. Brands, meanwhile, reduce the environmental impact of online purchases by aggregating shipments—saving up to 30% on average. More and more, growing companies select this option. It shows their commitment to sustainability and leverages existing national infrastructure, instead of spending resources to open and maintain brick-and-mortar stores. For example, Rothy’s will soon host five stores nationally, and Draper James operates four locations in the South. Patrons of both brands have the option to return purchases bought online to over 700 Return Bars nationwide, including Bed Bath & Beyond, Cost Plus World Market, Harmon, and PaperSource locations. Some retailers find this sustainable and innovative partnership model to be profitable enough to move completely online. Australia-based City Chic is closing down its store locations around the world because it can process returns and exchanges internationally with Happy Returns’ partnership.
In store. Many retailers offer box-free and label-less returns and exchanges in their stores. This method reduces cardboard, plastic, and fuel—especially when brands aggregate and ship products in bulk, and use reusable materials.
By mail. Brands like Rothy’s have innovated this part of the returns process. Rather than shipping a box within a box, Rothy’s designed its shoe boxes as packaging for both shipping and returns. Made from post-consumer recycled materials, they are biodegradable and vegan.
3. Use reusable materials
Box-free returns programs present another opportunity to make reverse logistics sustainable. These programs include reusable packaging large enough to ship multiple aggregated items, which are optimized to stack efficiently inside transportation vehicles.
Brands that use reusable packaging, such as Rothy’s and Draper James, reduce Greenhouse Gas (GHG) emissions by 0.12 pounds for every item returned. Multiplied, these Happy Returns customers reduce their environmental footprint by 120k pounds of GHG emissions for every 1 million returns.
How to get started
Industry leaders create sustainable supply chains when they incorporate these three components into their strategy.
1. A best-in-class platform.
Everything starts with software. Industry leaders use online return and exchange solutions that offer:
A fully-branded online exchange and return service
Intelligent suggestions for one-click exchanges
Multiple, sustainable return options that give shoppers maximum flexibility
International exchanges
A real-time view of available inventory
A mobile point of record for use in-store
Zero-tech integration
2. A network of efficient reverse logistics.
Everything ends with logistics. Reverse logistics deliver a compelling return on investment for businesses and the planet when they include:
Affordable options and rates for free exchanges and returns
Seamless integration with inventory management systems
Aggregation of returns and exchanges
Reusable packaging
3. A partner with time-tested expertise across the entire returns process.
Some vendors only track delivery. Others prevent certain exchange types, and make shoppers pay for returns. Others won’t touch the product or assist with reverse logistics.
Strategic brands don’t choose a partner that specializes in specific aspects of returns. That’s like putting things in recycling… and then never taking the can outside , or letting a collector pick it up. Leading retailers choose experts that have honed their operational excellence across the entire returns process for years.
Conclusion
When addressed holistically, reverse logistics differentiate and scale with your business, helping you win shopper preference with eco-friendly practices while maximizing profitability. Brands that source eco-conscious partners to implement comprehensive solutions will harvest benefits for their business, shoppers, and the planet for years to come. We share the responsibility to make choices that support our planet.
Want to learn more? Download this report on reusable packaging on the impact of switching from cardboard for returns.
