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10 March 2017

Has your Logistics Hangover Returned?

The biggest impact on retail logistics in the last 10 years is e-commerce which is becoming increasingly more sophisticated, with mobile e-commerce transactions on the rise, and the favourite consumer preference among shoppers being online; the Smartphone revolution has made internet shopping even easier than ever. It is therefore no surprise that product return volumes have also increased.

During the lead up to the recent festive period, online sales, as is now the norm, increased exponentially, as did next-day delivery expectations, impacting on e-fulfilment operations (more specifically low-tech distribution centre, which may not have enough storage and throughput capacity to meet seasonal despatch and returns demands). As Online shopping is made ever more convenient, the majority of festive shoppers make impulse purchases, or buy with the perspective that unwanted items can be easily returned; and the Distance Selling Regulations are there to make sure we can do just that. This however in turn, results in a significant seasonal influx in returned products (more so than the usual higher level of returns associated with internet selling); with research from Consumer analysts, Savvy Marketing showing that consumers increasingly make e-tailer choices based on a slick returns operation resulting in disproportionate return levels as consumers order multiple variables of an item which they would not do in a high street store, for example.

Many unwanted gifts and ‘multiple variable order’ returns are passed around the country to logistics firms which handle returned goods for major retailers. Subsequently, dealing with such a high volume of returns is a challenge for businesses; resulting in constant pressure being put on logistics providers and couriers to perform to maximum capacity and increasing the need for sub-contracting external capacity if and when it is available.

Gideon Hillman, founder and Managing Director of Logistics and Supply Chain Specialists Gideon Hillman Consulting, offered his insight into the issue of seasonal trends and e-commerce: “Dealing regularly with many online retailers of all sizes, as well as many Third-Party Logistics Providers (3PLs), we have observed the significant impact that the rapid growth of e-commerce has had on the 3PL sector, and how 3PLs have reacted to the many demands with shared user e-fulfilment facilities”.

A leading industry example of which is Clipper’s Boomerang returns management solution. Not only do consumers want to be able to return items at their convenience, they also want to have money refunded to their accounts quickly, and be kept up to date with that process.

Gideon closed his comment, stating: “It is not just the direct cost of return transport, but also the indirect costs of receiving and processing a return, carrying out a quality check prior to repacking for re-sale, and returning the product to the pick face ready to be sent out again”.

A large percentage of retail logistics and distribution facilities were traditionally designed to accommodate a more cost effective and efficient flow of bulk B2B orders to store as opposed to more single item picks for internet B2C orders.

It should not be overlooked that product returns, place a huge demand on retailers and 3PLs immediately following the seasonal period. With e-commerce rising fast as a growing trend, the issue of pressurised efulfilment and returns, may not be solely specific to seasonal peaks for much longer.

The key drivers for the e-fulfilment logistics service need to be more focused on the direct consumer buying patterns and e-tailers need to make more realistic projections for e-commerce sales growth, increased returns levels and logistics network capacity requirements.

Source: http://warehousenews.co.uk/2017/01/has-your-logistics-hangover-returned/