A growing eCommerce business, especially D2C brands require more time and effort to build the customer base as well as satisfy their expectations with the product as well as services. The purchased product has to go through several stages before reaching its customers such as quality check, packaging, shipping, and then it gets delivered to its right address, now comes the situation of whether the customer will like the product or not.
But, the problem appears when your customer doesn’t get to see the purchased product in real life and before that, it is returned to the warehouse.
How does this situation occur?
This situation occurs when an order is returned back to the warehouse and is known as RTO i.e., returned to origin. To your surprise, out of all the online orders, 30% end up getting returned.
There exist many possible reasons why the purchased order does not get delivered instead dispatched for RTO. Following are a few of the possible reasons for RTO:
- The customer is not available.
- The recipient does not approve the package.
- Wrong customer contact information.
- COD payment is not ready at the time of delivery.
- Premises closed at the time of delivery.
The increased RTO rate is creating a huge mess for your business profits which can be dreadful when measured, so this should be taken into account and find the right solution to resolve it.
What is RTO exactly? How does it bother your business?
RTO meaning in courier, any order that does not get delivered to the customers and is returned to origin at shippers’ request is termed RTO in courier.
In other words, RTO process is initiated when an order remains undelivered and hence returns back to the seller warehouse.
With the obvious mathematics, RTO in courier is an extra expenditure for you.
As a D2C brand, you are losing money in many ways over these RTOs in ecommerce, following are some you can relate to:
- Shipping charges for the shipment (forward and reverse).
- Quality check and repackaging costs.
- Product damage.
- Costs in the handling of recalled inventory.
- Locked Inventory.
- Disposal/Scrapping Cost.
- Loss of probability.
- Cost of client turnover.
- Extra operational costs are required for processing returned/canceled orders.
Every extra cost matters!
A good growing business might bear the loss of order processing and logistics as a part of the business but no one likes and entertains the losses when it comes to the product or the inventory.
As here in the case of RTO initiated, one the product is locked for many days until it goes through and survives the proper pipe of quality check and repackaging, second if the product gets damaged during return to origin at shipper’s, and you have to scrap it, it gets a compulsion.
In the first scenario, shipment RTO lock meaning the product remains of no use, neither you can display it in inventory nor you can sell it, despite its physical existence, it simply breaks the cash flow.
With a later one, when the product is dispatched for RTO it can get damaged in its return journey, you unnecessarily have to scrap it, giving you an inventory loss, neither it reached the original customer nor you had the option to resale it, in a chance to get some business.
Analyze the RTO rate!
Analyze your RTO rate by calculating the losses and segmenting them according to the products, which products are in huge demand, and which gets returned often. You need to identify the issues that the majority of customers are returning the same product, this can include product quality or pricing or any other factor you can work on to make it better and consumable.
Also, you can segment the RTO rate you receive by region, to know from which pin code(s) the products are majorly undelivered or returning to origin at shippers.
How to reduce the RTO rate?
– Improve Product Quality
After analyzing the reasons why the particular products have a high RTO rate and why were customers dissatisfied with the product. Keep first thing on priority to improve product quality as half of your job to reduce RTO will get done here.
If the customers are satisfied, What else do you want?
– Incentivize Pre-paid Orders
Non-genuine buyers and the COD payment method conclude 60% of the RTOs. Start to incentivize your customers for pre-paid orders, offer them discounts or cashbacks or ask for a COD fee to pull down the choice of COD payment method and reduce the RTO rate.
As when customers pay in advance they are somewhere bound to receive or accept the order.
During Order Processing
– Detect High-risk Orders
Make it a practice to check the risk of fulfilling orders before starting their fulfillment operations. Detect high-risk orders either confirm the authenticity of the order or avoid fulfilling it.
Check customers past purchase history to confirm if he/she is not in habit of returning/not receiving the ordered products, if they returned the order every time when COD applied, or any other fishy thing. Make sure to re-confirm the order via IVR or email or call.
Also, put an automated IVR to confirm the authenticity of the order every time you receive it with COD as a payment option.
– NDR management
After the order delivery is executed and the customer is not available at the address or he/she is not ready with the payment in hand; instead of marking it as RTO, take follow-ups for re-attempt of the delivery from your customers.
Save yourself from RTO, manage non-delivered orders and increase the chances of successful deliveries.
Do you want to analyze your data for non-delivered orders?
Get a free demo, to see how Shipway helps you with NDR management and reduce your RTO rate.