Streamlining Returns for Smarter Operations

Streamlining Returns for Smarter Operations

Returns are an increasingly costly reality for retailers and e-commerce businesses. Those that can streamline the process — while minimizing costs — will be better positioned to meet consumer demands and mitigate operational risks.

Q: What’s the cost of manual returns processing on retailers and e-commerce businesses today?

A: Retailers estimated that nearly 17% of their 2024 sales would be returned. Online return rates are even higher — about 21% more than the overall average — costing the industry nearly $900 billion last year.

The costs vary depending on the industry. For instance, apparel and footwear companies face different challenges than electronics retailers. Regardless of the sector, expenses include labor for sorting, inspecting, and restocking; transportation; reverse logistics infrastructure; inventory storage; lost revenue opportunities from delayed restocking; and more.

The financial burden becomes especially apparent after the holidays — aka “Returnuary” — when many warehouses ramp up staffing to handle the post-peak-season spike in returns. Beyond monetary costs, manual processing often creates inefficiencies and generates significant environmental waste. For example, some returned goods are discarded because restocking them is simply too expensive.

Q: With nearly 70% of retailers prioritizing returns process upgrades this year, what are some solutions that can deliver the biggest impact on operations?

A: Improving returns is about finding the right balance: managing inventory efficiently, preparing
for seasonal spikes, creating clear returns policies that discourage abuse while keeping shoppers happy, and investing in automation.

Here are a few operational upgrades to consider:

1. Lean on a 3PL: Partnering with a third-party logistics provider for returns processing can streamline the intake process so that items are more quickly evaluated and directed to the correct next step — be it restocking, refurbishment, or destruction.

2. Automate your inventory handling: Automating repetitive, labor-intensive tasks like restocking returned merchandise can greatly enhance warehouse efficiency and productivity by minimizing touchpoints and improving inventory accuracy and visibility. For instance, deploying a goods-to-person robotic system, such as an advanced Automated Storage and Retrieval System (ASRS), to handle inbound and outbound inventory can increase your facility’s workflow efficiency by up to 400% while virtually eliminating errors like misplaced or mispicked items. These highly dense systems can also reduce storage footprints by up to 75% — creating valuable space to manage peak shopping and returns volumes more effectively.

Q: What advice would you give companies looking to reduce losses and processing costs for returns?

A: Start by investing in automation for your fulfillment center(s). Goods-to-person systems eliminate labor-intensive tasks like walking to pick and restock items, enabling employees to focus on higher-value decision-making. These systems also integrate seamlessly with existing warehouse technologies, ensuring smoother operations overall.

Reducing human error is another major benefit — especially when it comes to achieving near- perfect order accuracy, which can help prevent returns altogether.

Finally, addressing the root causes of returns is key. Enhancing product descriptions, providing better sizing tools, and improving packaging can all help reduce the volume of returned goods, creating a win-win for both businesses and their customers.