E-commerce is the new normal for buyers and sellers, with countless businesses diving in amid the pandemic. Even major brick-and-mortar brands joined the bandwagon. While they did it as a survival response in the first place, the decision emerged as a game-changer for all the brands.
RTO stands for "Return to Origin." This happens when a package can’t be delivered to the customer for some reason. Instead of being delivered, it is sent back to the seller's address.
Most businesses want to continue with it for the long haul. And statistics show that growth is imperative. E-commerce sales are projected to grow 10.4% in 2023, and the market size is expected to reach a whopping $6.3 trillion this year. That spells a huge opportunity for retail and D2C brands.
While everything about the industry sounds great, it has a fair share of challenges as well. Of course, competition is the one player, one needs to worry about the most. But that’s only the tip of the iceberg because there are a lot more things to stress about.
Returns are one of them- in fact, Return to Origin (RTO) is a major headache as it can seriously eat into a seller’s profits. Research shows that E-commerce businesses lose over $400 billion in sales every year due to product returns. Nonetheless, having a strategy to deal with RTO can help business owners survive and thrive in the unpredictable landscape.
Let us share a comprehensive guide on return to origin in E-commerce, its potential impact on businesses, and a strategic approach to get through.
RTO, or Return to Origin, is a term used in E-commerce to describe the return of a package to the seller when it cannot be delivered to the customer for any reason. This can occur if the delivery attempt fails or if the customer refuses to accept the package. As a result, the package is marked as RTO and sent back to the seller.
Unfortunately, sellers must bear the cost of both forward and reverse logistics in such cases, which can be a significant financial burden. In fact, returns and exchanges can account for up to 50% of an E-commerce retailer’s revenue.
To calculate the RTO Commerce for your business, use the RTO rate formula below:
RTO rate = (Orders not delivered + Orders cancelled before delivery) / Total number of orders
The RTO rate represents the percentage of orders that were not successfully delivered. This is an essential metric to track as it indicates the efficiency of your shipping process. A lower RTO in ecommerce rate is desirable as it implies that products can be shipped faster and more reliably.
Research indicates that returns make up a daunting 30%+ of E-commerce shipping. It means a seller can expect one-fifth of their D2C orders to return. Even worse, it can affect a business’s bottom line due to the cost associated with shipping and managing inventory. Here are some potential pain points caused by the return to origin-
The most evident reason to worry is the cost of forward and reverse logistics. The seller ends up paying for shipping the item initially (if they offer free shipping) and repeating it when it gets shipped back to them. That’s double the sum. They also pay operational costs in order processing, such as the cost of packaging, quality testing, and labor. These can add up to a significant sum that is enough to erode the profit margins.
Some products returned to origin by customers may be damaged or in a condition that makes them unsellable. In such cases, E-commerce companies have to bear the cost of managing these products, which may include repairing or disposing of them.
When the seller gets another order for a return to origin product, they have to repeat the entire order processing schedule, from repackaging to quality checks and getting in touch with logistics.
When a product is returned, it takes up space in the warehouse, blocking inventory that could have been sold. This space comes at a cost, as the E-commerce company has to pay for warehousing storage.
The loss compounds if one sells through marketplace. Depending on the marketplace a seller collaborates with, they may not get a refund for sales commission even if the order does not get through. On top of that, most marketplaces charge an additional fee for a return to origin.
When these costs are added up, they can have a massive impact on the business’s profitability. And it worsens because of the sheer number of RTOs they encounter. Consider how much you can lose when one in five orders returns to the origin.
Return to origin in E-commerce is a part of the deal for D2C sellers because several reasons may lead to a return to origin. But it is vital to identify them so that you can reduce the possibility and implications of E-commerce returns. Here are the reasons for RTO Commerce:
When a customer adds inaccurate information such as an incorrect address, phone number, and email, they are eventually set up for a return to origin situation. If the delivery person tries to reach such customers, they are unreachable. There is no option other than returning the product to the warehouse and marking the customer as an invalid user. Besides incorrect details, ambiguous information and spelling errors may also cause problems. Missing out on zip codes is one of the common instances. As a seller, verifying and confirming customer information before shipping the package is important to avoid any errors and reduce the risk of RTO.
Another common reason for E-commerce product return is the unavailability of a customer to receive it. The logistics partner usually makes multiple delivery attempts before marking it for return-to-origin. Keeping customers in the loop by sending real-time tracking information or giving them a phone call before delivery can prevent RTO due to the non-availability of customers.
Surprisingly, a buyer who orders a product online may end up rejecting or returning it because of a lack of intent. The reasons may vary, from a change of mind at the last moment, getting the same item at a lower price or earlier from another seller, not requiring the product any more, and more. Whatever the reason, a seller cannot force them to accept the order, even if it sounds right.
Delivery of damaged or wrong products is another reason for return to origin. Damaged items can result from mishandling during shipping, while wrong products may be due to errors in order fulfillment. When customers receive damaged or incorrect products, they may return the item rather than keep it. If this happens, check with customers if they would like an exchange or store credits for the return.
At times, the reason for RTO could be as simple as the recipient not having the cash payment to honor a COD order. They will probably ask the delivery person to ship it back to the seller.
Another reason COD orders are prone to RTO Commerce is that customers may change their minds or have second thoughts about their purchase while waiting for the order to arrive. Since they have yet to pay for the item, it may be easier for them to cancel the order or return it.
E-commerce merchants need to be aware of these risks and possibilities and take proactive measures to address them. Fortunately, it is possible to address most of them and protect the business and profits in the long run.
While retailers cannot curb return to origin altogether, there are ways to minimize them. We have a list of actionable measures to limit returns at all stages of the conversion funnel. Here are some ways you can use to reduce RTO:
D2C business owners can start with an RTO-minimization strategy as early as the pre-sales stage when it comes to managing returns. Here are the steps you can take:
Poor product quality is detrimental for retail and D2C players, specifically in a competitive E-commerce landscape. Even if customers place orders, they will likely return them eventually if there are quality issues like incorrect sizing. Therefore, sellers need to analyze the potential causes of a high Return to Origin rate of specific products and work on improving them. One of the actions that they can take is size standardization, which can help reduce RTO drastically, besides bolstering their reputation in the long run.
Product showcasing is a key challenge for E-commerce sellers. It is unrealistic to expect buyers to click on a whim when they cannot see, feel, and experience the offering. But going the extra mile with showcasing does help. Providing detailed information about products can help customers make informed purchase decisions. Include product descriptions, specifications, and high-quality images and videos to give customers a clear idea of what they are buying.
Adding freebies, discount coupons, and gifts to an order is a surefire way to reduce the chance of returns. Plus, one gets loyal customers willing to stay and recommend the brand by word of mouth. That’s a win-win!
COD is one of the primary drivers leading to return to origin. After all, it seems much safer to return an order when one hasn’t paid for it. As a seller, one can address the risk by incentivizing customers with cashback or discounts for pre-paid orders. It is possible to dissuade them from choosing the COD payment method by asking for a small fee.
It’s no secret that many E-commerce companies offer friendly return policies, which allow shoppers to buy items, try them out, and return them if they don’t meet their expectations. While such policies can undoubtedly increase conversions, they can also lead to an uptick in returns. To prevent customers from exploiting loopholes, it’s crucial to ensure your return policy is ironclad.
Reevaluate your E-commerce return policy to clearly include these aspects:
By taking these factors into account, you can help ensure that your return policy benefits both your customers and your business.
Besides acting early, sellers can also lower the return to origin risk during the order processing stage. Here are a few steps to implement in this context:
Not all E-commerce orders are the same. Some are at high risk of return to origin, so sellers must keep an eye on them. Risk management should be an integral part of order fulfillment operations. Checking the customer’s past purchase history is a viable way to confirm whether they return the ordered products. A seller needs to worry if they are notorious for returning COD orders. The best bet is to re-confirm the order via call, email, or IVR before shipping it.
The inability to locate the delivery address of customers is one of the most common reasons for a return to origin. Incomplete/invalid/non-deliverable addresses can be problematic. Fortunately, it is possible to resolve the issue by leveraging technology. There are software tools to ensure that an address has been keyed in correctly and completely. They even give an apt error message to prompt the buyer to complete the address.
In addition to software tools that verify and complete addresses, E-commerce merchants can also leverage faster checkout and RTO reduction automation tools to reduce return rates. Additionally, using AI-powered predictive platforms can help identify potential defaulters at the onset, reducing the likelihood of returns.
3PL collaboration can be a game-changer for an E-commerce business as these providers help with the entire shipment process, including picking, packing, and shipping. Their expertise in managing the shipment process ensures that orders are shipped to the correct destination on time. This reduces the chances of products being returned to origin returned due to incorrect or delayed deliveries.
They also take care of the returns, so partnering with a reliable one can minimize the return to origin-related hassles.
Fast shipping and delivery experience is another measure to reduce the chances of returns. Online shoppers are impatient lot, so they end up buying a product from a brick-and-mortar store if the delivery date sounds too distant. In such cases, returning the product is the obvious repercussion. Brands can address the possibility by providing super-fast delivery services to minimize waiting time and frustration.
A proactive approach to return to origin minimization also includes the post-sales phase. D2C sellers cannot afford to get complacent at any stage when it comes to E-commerce sales. These measures are effective for dealing with the risk of E-commerce returns post-sales:
Non-delivery reports (NDR) offer visibility into the order journey and the potential reasons for returns. They are critical for sellers looking to resolve and limit the return to origin rates for the long haul. For example, if a seller can see the delivery person citing customer unavailability as the cause of non-delivery, they should contact the customer to confirm their availability and ensure delivery. Focusing on NDR management can take the E-commerce game a notch higher.
Listening to the customers is the key to success for a business. Customer feedback offers insights into what’s working for business and what needs to be improved. Including it in the post-sales process can help a business owner to get actionable insights into their product and logistics customer service. They should also implement measures to improve things to avoid a return to origin for future orders. Acting on customer feedback does more than resolve the issue, but also strengthens the relationship with buyers and boosts retention.
In conclusion, it is important to consider the impact of returns on their profit margins. While returns are inevitable, they can eat into profits if not managed properly. Implementing a well-designed return policy, tracking returns data and analyzing it can help businesses reduce the cost of returns and increase their overall profitability.
ANS commerce, a leading full-stack E-commerce service provider, offers a suite of services and tools to help you manage your E-commerce returns effectively. With ANS commerce, you can gain insights into return patterns, and implement strategies to minimize the cost of returns. Our streamlined return process and data-driven approach to order fulfillment can help you increase your profitability and achieve sustainable growth in the competitive E-commerce landscape. With the help of our expert team, you can focus on growing your sales and expanding your customer base while leaving the management of returns to us.
To know more about how ANS Commerce can help you, Book a free consultation with our E-commerce experts today!
Return to origin is known to be a scenario where a package is being returned to the seller for some reason as it cannot be delivered to the customer. The term is used in the e-commerce industry. This can also take place in scenarios where the customer refuses to accept the package or delivery fails due to some reason.
This step takes place when a customer opts for return pickup after the order has been delivered.
When a shipper is willing to return an undelivered international shipment back to its origin, a RTO return to origin request is created in writing by the shipper. After the request is created, all the requirements regarding the return, like redirection of duties, taxes billed at the time of destination, and the RTO charges, are all being paid by the shipper.
When a package is being returned to origin, you start by creating a return label. Go to the Returns section and choose ‘Create return’. Select the delivery provider that handled the original shipment and add any comments if needed. Scan the package code or tracking number to update its return status, and note the reason for the return. You can add more packages or close the manifest once you’re done.
Next, move to the ‘Awaiting Actions’ section in the Returns menu. Scan the package number, tracking number, or order code to find the package. Review the items and decide what to do next. If you choose to “Reship Immediately and Expect Return,” the status will change to “Return Expected.” Otherwise, it will stay as “Return Acknowledged.” This step also creates a new sale order with the same details.
When the returned item arrives at the warehouse, you’ll need to create a putaway process. Scan the shipment number or SKU code to manage the RTO in e-commerce. Print and verify the putaway list, ensuring the status changes to “Reshipped.” Determine if the returned item is in good or bad condition, and update the shelf location and quantity if necessary. Finally, complete the putaway to place the item back on the shelves. Following these steps will help you efficiently handle returns at the warehouse and make your return to origin process easy.
When the delivery of a parcel to the customer fails due to any reason and then the parcel is returned to the seller, the process from which the parcel is being delivered to being returned is known as the shipment process.
RTO (Return to Origin) happens when a delivery can't be completed and the package is sent back. This can be due to reasons like the wrong address, the customer not being home, or the package being rejected. In such cases, the delivery service returns the package to the warehouse, and the customer gets their money back.
Reducing Return to Origin (RTO) in e-commerce means cutting down on orders that get sent back to the seller without reaching the customer. To do this, ensure accurate addresses by using tools that check and suggest correct details as customers type. Keep customers updated with order confirmations and delivery notifications, and offer flexible delivery options, like pick-up points or scheduling. Educate customers on why accurate addresses matter and clearly explain your shipping rules.
For expensive orders, double-check customer details to avoid fraud. Work with reliable couriers and use local warehouses to speed up deliveries. Make returns easy to reduce refusals, marked rto order reject and use data to understand why orders get returned. Simplify the checkout process and build trust with loyalty programs and great customer support. Platforms like Flipshop can help by providing address-checking tools, customizable messages for customers, and a dashboard to track and reduce RTO rates.
