Summary: Retailers have a returns problem. 3PLs should take the lead as the only providers able to supply full end-to-end solutions.
In our recent coverage of GXO’s acquisition of Clipper, we explored how there’s no better time for third-party logistics businesses (3PLs) to get into returns amongst rising return rates. Since December 2012, returns volumes have been growing faster than parcel volumes – and are now four to five times higher than they were a decade ago.
In some cases, returns are reaching rates of 40%. Retailers have been feeling the blow, with headlines such as Boohoo’s profits sinking by 94% to £7.8 million, followed by a recent decision to charge for returns, or Missguided falling into administration before being rescued and bought by Frasers Group. It’s only a matter of time before retailers like ASOS will start charging for returns in a desperate bid to manage increasing costs.
Retailers want better returns solutions. 3PLs are uniquely positioned to take the lead in the returns world as they are the only providers that can provide full end-to-end solutions. Rather than retailers using different carriers and providers for separate parts of the journey, they can rely on a 3PL to take care of all the merchant operations in one simple and efficient solution.
Why do 3PLs hold a unique position in returns?
Without the physical capacity to sort and redistribute items and the technical capacity to provide a returns portal to their consumers, many retailers can’t handle returns at scale, particularly at the rate that they are currently experiencing them. Thus, these retailers turn to external providers to supply pieces of the returns puzzle, such as portals.
Retailers are already losing an average of £20 for every £30 item returned. Accessing returns solutions is a great move, but having different providers for every aspect of the consumer journey won’t be as efficient as using a single provider for the entire process. The more parts of the journey a provider can offer, the smoother and more cost-effective the journey becomes.
This is where 3PLs are uniquely positioned to step in. Instead of offering a part of the journey, 3PLs are the only providers that can handle the entire end-to-end returns solutions for retailers. From the moment consumers register a return, through distribution, sorting, repair, and redistribution, 3PLs provide a single, efficient journey for both retailer and consumer.
Moreover, as 3PLs aren’t locked to specific parcel carriers or trying to funnel volume through a specific channel, they can potentially offer more drop-off points and locations, increasing consumer convenience. As 8 out of 10 consumers will stop shopping with retailers after a negative returns experience, using a 3PL for returns will also increase customer loyalty and lifetime value for retailers.
3PLs are already halfway there
3PLs are already providing delivery services for merchants. They’re already highly trusted, and have most of the resources required to enter the returns parcel market and unlock new revenue streams. The only missing piece for 3PLs to create an intelligent returns infrastructure is a digital consumer portal, to collect data and apply different rules to items during the pre-sort stages. This will not only improve efficiency for 3PLs, but also provides a better returns journey by individually assessing each item before they hit the sortation facilities.
These rules will also influence how items are returned and to which location. For example, consumers can be offered different delivery options depending on the product weight or dimensions, so bulky items can present a 2-person collection option rather than drop-off, saving time and resources of consumers having to contact consumer services to arrange this alternative.
The rules data will be able to intelligently route items, so any broken or damaged item can be shipped directly to a repair facility. In contrast, unused items in perfect condition that might be the wrong size can go straight to redistribution.
A rules-based return portal will also have options to restrict returns. For example, items outside the returns window or with certain product codes (like underwear) will be rejected. In addition, low-value items that would cost more to ship back can opt to issue refunds without consumers returning the item, saving on return costs.
The more data collected in the beginning, the more efficient and cost-saving the returns process will be. 3PLs are uniquely positioned to pass these savings onto retailers while securing growth on both sides.
3PLs are the future of returns
3PLs hold a uniquely strong position to take on the returns market for retailers, as the only providers capable of offering a truly end-to-end solution. Instead of outsourcing parts of the journey, retailers can rely on 3PLs to manage the entire returns journey.
By harnessing pre-sort data through the consumer portal, 3PLs can efficiently route and sort items before they arrive at their sorting facilities, providing a more efficient and cost-saving returns process. Not only will this be more efficient, but 3PLs can also offer more consumer drop-off points through different carriers, increasing consumer convenience and improving the overall consumer experience. It’s a win for retailers, consumers and 3PLs.
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