Amazon Reverse Logistics
Most of us at least once would
have returned a product which we have bought from e-commerce platforms. I still
remember when I had to return a product which I bought from eBay around 5 years
ago where I had to courier them back my product. But look at the current scenario
where the Amazon delivery person collects the product from your doorstep. How
did Amazon achieve it and is it costing them too much? The cost of returns for
any company is high and in the case of Amazon since it uses its employees to
collect the return products from the doorstep it takes a heavy toll on them.
Why does Amazon do this? In my opinion, its because Amazon is obsessed with its
customers. Amazon primarily offers value like faster delivery and consistent
delivery but with its reverse logistics it delivering yet another value to its
customers i.e., free cost of returns and the choice to return the product if the
customer didn’t like the product.
The reverse logistics of Amazon
starts when the customer selects the return option. The delivery person
collects the product and returns it to the Amazon hub and from there to the
Amazon fulfilment centre. And the rate returns for most e-commerce sites are
around 20-30% which is not a small figure. Also, the cost associate with returns
is not just with the logistics but include the cost incurred while delivering the
product the customer, packaging of the product, also cost incurred for the recycling,
and the holding cost. All this combined is not a small amount which Amazon
takes without charging its customers. So to cut short the cost Amazon had to do
deduct the return charges from the customer. But if Amazon tries to do so it
risks of losing some of its customers. So to tackle this issue Amazon filter
out its customers according to the reasons the customer give for each return. If
the reasons are genuine those customers get free shipping or else the customer
has to pay for the return charges.
To further decrease the cost of returns incurred by Amazon, they have their own Amazon return shops or partnering up with retail or brick and mortar stores. Here the customer has the option to go to a nearby store which takes Amazon returns. Thus, reducing the use of Amazon delivery boys. Now a question will arise in the mind of the readers why would any retail shop agree to that? The answer is very simple, the retail shop which ties up with Amazon has seen fewer customers and low sales and this is an opportunity for the shops to gain potential customers. When a person enters the retail shop to return the product, the retail shop gets an opportunity to turn that person into a customer. If the retail shop has to incur the cost of reverse logistics, it getting a profit from the sale of a product is greater, then the retail store is getting a huge opportunity. This is a win-win scenario for both Amazon and the retail store, as Amazon is reducing its cost and the retail shops are getting potential customers.
After getting the returned product to the fulfilment centre, the product is stored in the inventory. Some of the products are burnt or put to waste. But burning products increase the carbon emission and it is wastage of resources. This led to a new business opportunity i.e., resale of return products by a 3rd party.
Video reference: https://www.youtube.com/watch?v=FPPSn-M3JQk&t=416s
Image references: https://chainstoreage.com/amazon-expands-free-return-policy
Very Interesting read and interesting to note Amazons wayof making reverse logistics possible
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