Fewer returns equal higher gains for E-commerce

Team Shadowfax

The e-commerce ecosystem in India is markedly unique in its character. As opposed to mature markets like the US and Europe where prepaid orders are the norm, nearly 60 percent of the buyers here lean in favour of cash on delivery as their preferred mode of payment. This unique dynamic has resulted in a peculiar problem for online sellers — an abysmally high rate of Return to Origin (RTO), which refers to orders being shipped back to warehouses on account of unsuccessful delivery attempts. According to an Economic Times report, RTO accounts of nearly 30 percent of the cost of running an e-commerce business in India.

How RTO Strains Ecommerce

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Frequent unfulfilled order deliveries can ostensibly place financial strains on e-commerce firms, as they continue to lose money on:

  • Return logistics
  • Blocked inventory on account of items in transit
  • The cost of quality check and re-packaging
  • Increased operational costs in processing returns
  • Losses due to damage in transit
  • Increased pilferage, as items are often not returned in their original packaging

While the incidence of RTO in prepaid orders is not unheard of, it is as high as 40 percent in COD orders. With COD accounting for over 60 percent of all online purchases in the country, every third order runs the risk of RTO. This poses a potentially grave threat to the e-commerce ecosystem. Rudimentary options for checking this trend further compound the problem. Most e-commerce businesses have to rely on a measure such as:

  • Blocking out international cards to prevent fraudulent orders
  • Stopping deliveries to cities or pin codes notorious for high RTO rate
  • Placing a cap on the order size
  • Blocking customers with a history of high returns

There is no denying that reduced RTO translates to good business, these macro checks and balances do more harm than good.

Finding a Fix

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Often the answer to the most complex problems lies in simple solutions. The RTO menace plaguing the e-commerce sector can prove to be a textbook example of this. The issue of unfulfilled deliveries can be addressed to a large extent by streamlining the process of shipments itself:

Preventing Delayed Deliveries

Delayed deliveries are a surefire way of alienating customers, and if such a customer has not already paid for an order, they won’t hesitate in refusing to ‘accept’ delivery. Thus, leveraging on-time delivery is paramount.

Same day or next-day deliveries offered by Shadowfax app can be a breakthrough in this area. The logistics service prides itself on consistently adhering to a quick TAT (turn around time) more than 95 percent of the times. In a rare event that an order is delayed, Shadowfax offers its clients alternative fastest modes of transportation, thus, quickly arresting any chances of returns.

Smart Delivery Planning

The real-time delivery tracking feature bridges any information gap in ground operations, and thus, enhance supply chain productivity. The Shadowfax UI helps you stay on top of your delivery planning game through access to up-to-date data on goods, riders, and consumers, and real-time engagements such as distance covered, ETA, trip duration, and so on. This, in turn, helps cut back on RTO logistics.

The web app proves useful in engaging with customers by sending out messages and push notifications to ensure their availability at the time of delivery, resulting in successful delivery attempts 90 percent of the time.

Fraud Detection

Frauds are a key cause of high e-commerce returns, naturally then, getting ahead in the fraud detection game is crucial. Real-time GPS-enabled tracking used by Shadowfax can help detect any red flags such as damages, breaches or fake remarks by delivery partners. GPS tracking combined with call masking can reduce RTO by up to 50 percent.

The Bottom Line

RTO will remain a part of e-commerce culture in India, at least for the foreseeable future. A businesses’ best shot is to minimise losses as far as possible. An efficient, technologically sound logistics partner like Shadowfax can go a long way in realising that goal. The amalgamation of tech with logistics operations has helped Shadowfax consistently maintain RTO rates 2–3 percent lower than its competitors.

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