Returns are an inevitable part of e-commerce. What started as a feature to reduce risk for consumers when buying online has grown into a massive issue affecting consumers, merchants, and 3PLs alike.
The scale of returns in the United States surprises most people. According to the National Retail Federation (NRF), almost $1 trillion worth of goods will be returned to retailers this year. E-commerce is fueling this growth, as online transactions are returned at a rate eight times higher than in-store purchases.
Returns present significant challenges. Consumers demand ease and efficiency, with 96% saying they’ll buy again from retailers offering “easy” or “very easy” returns policies. Conversely, a poor returns experience makes customers three times more likely to abandon a retailer. For merchants, inefficient returns handling can lead to delays in restocking, increased waste, and the risk of fraud, costing retailers over $100 billion annually. Meanwhile, 3PLs find returns especially labor-intensive, often requiring three to five times the effort of outbound fulfillment tasks, further complicated by the lack of appropriate technology.
However, a well-optimized returns operation can address these challenges while enhancing customer satisfaction. Here’s how merchants and 3PLs can make returns an asset rather than a liability.
Improving the Customer Experience
1. Make Your Policy Clear and Accessible
Confusing or hard-to-find policies reduce conversion and frustrate customers. Revisit your website as if you were a first-time visitor. Is the return policy easy to locate and understand? If not, simplify it and make it prominent. A clear policy builds trust and removes purchase barriers.
2. Partner with an RMA Provider
Return Merchandise Authorization (RMA) tools simplify return processes for both customers and merchants. Without them, returns often rely on slow and cumbersome email communications, which frustrates customers and burdens your customer service team. Once your returns volume exceeds a couple of hundred per month, an RMA solution becomes essential. It enables faster processing, better communication, and a smoother experience for customers.
3. Offer a Customer-Focused Returns Policy
A customer-centric returns experience starts with clarity and convenience. Consider offering at least one free return option — it’s often the deciding factor for hesitant buyers. Additionally, explore label-free and box-free return options. These not only improve customer convenience but can also reduce fraudulent returns by ensuring items are processed in person.
How 3PLs Can Partner with Merchants to Turn Returns into an Asset
As returns grow in scale and complexity, 3PLs have a pivotal role in helping merchants enhance customer satisfaction while minimizing the negative impacts of returns.
1. Identify a leader
For merchants with high returns rates, such as those in footwear and apparel, returns are not just about receiving items back. They’re about efficiently re-integrating these goods into inventory. A dedicated returns leader within a 3PL organization can help prioritize reverse logistics and streamline these processes.
2. Work closely with your clients
Collaboration is key to effective returns management. Begin by reviewing high-return-rate clients and establishing clear standard operating procedures (SOPs) for inspection, grading, and restocking. Align on shared KPIs and customer experience goals. Integrate returns processes into client onboarding to ensure everyone is aligned from the start. Transparent and collaborative relationships make it easier to optimize operations.
3. Invest in the right technology
Returns-focused technology can transform operations. Tools that enable intelligent sorting, automated grading, and real-time analytics can significantly enhance efficiency. They reduce processing times, improve accuracy, and provide valuable data to both 3PLs and their clients. For 3PLs handling 100-200 returns daily or more, these technologies are a worthwhile investment.
4. Remember that people are most important
While technology and processes are critical, people remain at the heart of successful operations. High-performing 3PLs have strong leadership and comprehensive onboarding and training programs. Establish clear feedback loops so frontline employees can share insights and suggest improvements. This fosters innovation and ensures that operations evolve to meet client and customer needs.
Looking Ahead
As e-commerce continues to grow, returns will remain a critical challenge for merchants and 3PLs. However, this challenge presents a tremendous opportunity for innovation. The future of returns will likely include:
● More automation and intelligence: AI and machine learning will improve workflows and enhance efficiency.
● Focus on fraud: Advanced fraud prevention measures will protect retailers from growing abuse.
● Circular economy moves into the mainstream: Returns will increasingly feed into recycling, refurbishment, and resale programs.
● Customer experiences are still in fashion: Faster, more convenient returns processes will become the norm, supported by advanced logistics operations.
By investing in their returns operations today, merchants and 3PLs can turn a common pain point into a competitive advantage. Those who innovate in this space will not only reduce costs and inefficiencies but also build stronger customer loyalty and long-term success.
Kyle Bertin is the co-founder and CEO of Two Boxes. He is passionate about using technology to make the supply chain more efficient and sustainable. Previously, Kyle held roles in strategy and operations at Outrider, Flexport, DeepScale (acq. Tesla), U.S. Silica, and Deloitte. He holds a BA in Economics from Northwestern University and an MBA from UC Berkeley’s Haas School of Business. In 2022, Kyle received the Pros to Know award from Supply & Demand Chain Executive.
This article originally appeared in the January/February, 2025 issue of PARCEL.
