Returns Pains: Causes and Solution


Returns in distance trading are unavoidable. Thus, one goal of returns processing is to design them to be cost-efficient.

  • PRO
  • As a rule, the reduction of the returns rate results in comprehensive cost savings.

  • Efficient returns processing saves costs. Structured processes and a high degree of automation help to process unavoidable returns in a cost-saving manner.

  • Preventative measures such as avoidance or prevention, on the one hand, as well as a consistent focus on the customers’ requirements help to reduce the returns rate.

  • A high degree of integration between the systems and participants involved (shipper, service provider, logistics specialist and consumer) contribute to automation, reduce processing times and help to reduce costs.

  • Besides costs, returns processing can also make a positive value contribution: Sales promotion through the take-back and upcycling for resale.

  • The cost-orientation may not compromise customer satisfaction.

  • If the returned goods lose value only slowly or not at all, a structure that is as cost-efficient as possible should be favored whereby, conversely, if there is a high value loss for the returned goods, the processing time must be kept as short as possible.

  • Make-or-buy: Outsourcing of the returns processing offers potential cost-savings, but this is not always the case in practice.

Process Controlling

Returns management is complex because it requires the coordination of numerous “teammates” and numerous intertwined processes. The prerequisite for the mastery of these tasks is to quantify the returns phenomenon, to understand it in detail and to apply best practice strategies.

  • PRO
  • A high degree of integration between the systems and participants involved (shipper, service provider, logistics specialist and customer) create transparency for all participants.

  • Retours controlling with a monitoring of the central logistical, financial and operational key indicators provide points of reference for weak points and purposeful optimizations.

  • The returns management enables the development of competences, based upon which competitive advantages can be generated.

  • The resources made available (personnel, technology and locations) influence the success of the returns management.

  • Planning uncertainty is created with regards to the quantity and quality of the returns for the subsequent processes.

  • Deviating processes trigger long timeframes, internal friction, dissatisfied employees and ultimately result in low efficiency.

  • Transaction and/or process errors result in reduced customer satisfaction.

  • The determination of the degree of goal-attainment in the returns management requires precise knowledge of customer requirements.

Value Stability

Depending on the returns strategy, returns generate not only costs, but rather can provide a positive value contribution through additional revenue possibilities.

  • PRO
  • Sales promotion through the take-back of old products, their refurbishment (upcycling) and resale.

  • Promotion of the recycling strategy, for example, through trade-ins.

  • C-returns can be refurbished and resold as used goods or in secondary markets (e.g. in developing countries).

  • From C- and D-returns, through recycling, raw materials can be recovered and sold or components can be recovered and individually sold.

  • These practices improve the eco-balance between the manufacturer and the seller.

  • The ecological effect can have a positive effect on the brand.

  • Companies can donate their revenues obtained in such a manner for charitable purposes and thus promote their image.

  • The financial prerequisite for value preservation and reuse is a positive net returns value.

  • Returns result in a margin loss.

  • Resale or recycling promotes the risk of price deterioration.

  • Risk of cannibalization: The trade of refurbished devices can devastate the market for new products.

  • As a prerequisite, customers must be informed of the existence of the pick-up and recycling system. Where applicable, incentives may be required such as price discounts or trade-ins.

  • If returned goods are sold on secondary markets at dumping prices in an uncontrolled manner, this weakens the brand.

Make or Buy

For shippers, in most cases, the question already arises early on regarding whether the returns processing should be done internally in-house or by an external service provider (“make-or-buy” decision). Because various qualitative and quantitative factors are important which extend beyond the pure cost aspect, no universal recommendation is possible. Rather, an individual detailed analysis is required – particularly because it entails a long-term binding decision which can be revised only with difficulty.

  • PRO
  • An awarding of returns management mandates to third parties is done preferably for a high and/or an increasing number of returns.

  • Central decision-making factors are the number of returns as well as the strategic considerations.

  • External providers can usually offer the required service cheaper due to larger-scale quantity structures.

  • Where applicable, companies with a very large number of returns can themselves obtain the cost effects from external service providers and tend to process them internally.

  • Shippers who opt for internal processing assign the returns management greater strategic importance than companies who outsource these activities.*

  • If such mandates are awarded to third parties, in addition to the contractual components as well as the SLAs, the development of the outsourcing relationship, the location planning and the process-supporting technologies are of central importance.

* Returns Management in the Mail Order Business, Asdecker, 2014
  • If the seller considers the returns management to be a core competence, this is reflected in a higher controlling expenditure for the external partner. Higher costs and longer decision-making paths can be the consequence.

  • Through the outsourcing, the responsible parties lose the direct contact to the returns process. The processing is no longer done by decision-makers who have an emotional investment in the company for whom the returns constitute an annoyance, but rather by neutral employees.*

  • A conflict of goals can be created between the outsourcing and the preventative returns management: If the service provider’s fee is dependent on the number of returns processed, there is no motivation to reduce the number of returns.

* Return Management in the Mail Order Business, Asdecker, 2014