3 things retailers need to understand about the world of reverse logistics

Retailers have never been more aware of the importance of sustainability practices and the environmental, economic, social and consumer benefits that accompany them. With a growing focus on consumer demand for sustainable offerings, companies are exploring the circular economy and how it plays a vital role in broader sustainability initiatives.

Reverse logistics used to focus only on reducing the financial loss resulting from unsold or returned products. It is now seen as the backbone of a circular economy, managing the collection, sorting, repairing and refurbishing of products for resale and recycling. A comprehensive reverse logistics strategy helps companies reduce administrative, transportation and support costs, increase product velocity and asset value recovery, and generate sustainability benefits by eliminating or significantly reducing products and materials being sent to landfill.

At the Reverse Logistics Association’s annual conference earlier this year in Las Vegas, retail industry professionals and solution providers gathered to connect, collaborate and learn from each other. Here are three important points of interest they discussed.

Reverse logistics is growing and becoming more important

After more than a doubling of returns volume in the United States alone in the last six years to over $743 billion, the reverse logistics industry is expected to grow significantly over the next decade. The growth led American Public University to become the first in the United States to offer bachelor’s and master’s degree programs in reverse logistics, preparing professionals to adapt to future procedural and technological trends to improve product and cargo flow through an increasingly complex supply chain.

There also has been a major shift toward retailers handling the disposition of returns rather than sending them back to the factory or manufacturer. Understanding environmental compliance is an important part of reverse logistics. Products like unopened liquid cleaning products, for example, that are considered non-hazardous when being shipped to stores (forward logistics) can be considered hazardous when being shipped from stores (reverse logistics). The same products can be thrown away by households but not by retailers.

Even if companies don’t intend to violate regulations, they can be held liable, with penalties that can reach tens of millions of dollars. Adhering to regulations and standards for the handling and disposing of products, materials and packaging helps companies minimize negative effects on the environment and reduces waste.

Multichannel recommerce strategies and third-party partners are key

Disparate retailers might consider various means of recommerce — in-store sales, outlet chains, third-party vendors — but there are commonalities in execution. Scalability and space management must be taken into account; retailers want options to move inventory quickly and efficiently. Expert service partners are vital in helping retailers process, refurbish and resell returned goods to reduce costs and increase asset recovery.

Data plays an important role when developing a multichannel recommerce strategy, though it can be challenging to capture the right metrics or insights. Some companies might be challenged by finding the true cost of owned inventory, others might struggle with clean financials — separating an outlet business from the core business, for example — and still others might have difficulties understanding the impacts of clearance versus full-price strategies.

No matter the method, retailers must regularly review their channel mix and goods allocation strategies. Cross-functional collaboration is key, as operations teams are essential in building a recommerce strategy, as is training and education for associates.

Electronic products create special concerns

The reverse logistics associated with electronic products create unique risks. Hard drives are ubiquitous, essential and potentially full of sensitive data. They are the building blocks of a physical infrastructure supporting an ever-growing volume of data globally. When they reach end-of-life, however, sustainability and security concerns come into play.

Physical destruction assures that any data stored on the device is gone but isn’t effective from a sustainability standpoint. And as the materials used to make such devices become more unattainable, reuse becomes even more optimal. But simply decommissioning and reselling a device does not provide the security users require.

A number of global names in digital storage, sustainability and blockchain have collaborated on the Circular Drive Initiative, a joint effort to reduce e-waste by promoting and enabling the secure reuse of storage hardware. The initial focus is to assure data security through standardized safe encryption, media handling and electronic erasure.

Investing in a circular economy is better for the planet, for customers and for the bottom line. Find out more about reverse logistics and NRF’s sustainability initiatives by visiting the NRF Center for Retail Sustainability.