The hidden impact of returns
Returns are an operational reality, but their hidden impact often goes unnoticed.
From rising costs to strained resources, the challenges of managing returns extend far beyond the obvious. In wholesale and retail sectors alike, understanding the full scope of these challenges is key to safeguarding profitability, operational efficiency, and sustainability.
The growing volume of returns
In recent years, returns have become a significant and growing challenge across industries. While B2C return rates can exceed 30%, B2B returns - though lower - are steadily increasing. According to the Reverse Logistics Association, 8-10% of orders are typically returned in wholesale and retail operations.
Processing returns isn’t cheap. Studies show that returns can cost 2-3 times more than outbound shipping due to the complexities of inspection, repackaging, and restocking. For businesses dealing with bulk orders, these hidden costs can add up quickly and threaten already-tight margins.
Operational strain
Returns management also places significant strain on operations. A report by the National Retail Federation found that returns processing consumes up to 20% of warehouse labour hours.
Key operational impacts include:
- Order delays: Redirecting resources to manage returns often causes delays in fulfilling new orders, potentially affecting customer satisfaction.
- Inventory inaccuracies: Inadequate returns handling can lead to stock discrepancies, making it harder to maintain accurate stock levels and forecasts.
The environmental cost of returns
Returns are increasingly seen as a sustainability challenge. Research highlights that 20% of returned items are discarded rather than resold, contributing to the growing waste problem. Additionally, returns logistics contribute to 16 million metric tons of CO₂ emissions annually worldwide.
Businesses striving to meet sustainability goals can no longer ignore the environmental implications of inefficient returns processes.
Customer retention and returns
Returns aren’t just a logistical issue—they also affect customer relationships. Research from UPS shows that 89% of B2B buyers consider the returns experience when deciding whether to continue doing business with a supplier. Efficient returns processes, clear communication, and swift resolutions can help build trust and loyalty.
Solutions for managing returns more effectively
Addressing the hidden costs of returns requires a proactive approach:
- Invest in technology: ERP systems, like Orderwise, can automate returns management, reducing errors and improving efficiency.
- Prevention first: Clear product descriptions, accurate picking processes, and robust quality control can help reduce the volume of returns.
- Leverage data: Use returns data to identify patterns and address underlying issues, from product defects to packing errors.
Next steps?
Returns management is more than an operational necessity—it’s a business-critical function with financial, operational, and environmental implications. By addressing the hidden costs of returns and optimising their processes, businesses can transform this often-overlooked area into a source of competitive advantage.
Want to learn more? Discover how technology like Orderwise can help you streamline returns management and turn challenges into opportunities.