STUDY OF CHALLENGES FACED IN REVERSE LOGISTICS BY ECOMMERCE INDUSTRY IN INDIASubmitted by : Divya Rawal GMAY16GL103

PROBLEM STATEMENT AND RESEARCH OBJECTIVE

1. Ecommerce is one of the fastest growing sector, showing an average growth rate of 45% Y-O-Y. India being a developing country is facing challenges to cope up with the pace, Reverse logistics being the biggest one (for all, suppliers, consumers as well as the 3PL)

2. The average return rate in the industry contributes to approximately 15-17% of the overall sales, which at this rate will contribute to close to $20 billion by 2020 if the issue isn’t addressed.

3. In the current scenario, returns is a 7-30 days process, which causes inconvenience to both, the customer: delay in pick up, delay in receiving the new product/ refund, dissatisfaction by the ecom website and the seller: non availability of customer for pick up, mismatch/ changed of product, missing product, customer inconvenience eventually leading to loss of customers.

4. Analyzing the major factors contributing to the increasing number of returns act as a platform to understand the major reasons behind these numbers that is one of the major hindrance on the growth path of the ecommerce companies

5. On studying ways of reducing the returns, it will further help the ecommerce companies to reduce their processing cost upto 25%, increase profitability upto2-5%, productivity min upto 10%, enhance customer satisfaction to 100% and possible asset realization of 2-4X

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SOP 12th may 30th may 100%   

Research Proposal 31st may 20th jun 100%   

Interim Draft review 21st jun 13th july 100%   

Presentation 14th july 20th july 100%   

Submission of Final draft 21st july 30th july 100%   

Questionnaire for primary data 5th sept 15th Sept 0%   

Primary data collection 15th Sept 30th sept 0%   

Analysis, interpretation of primary data 1st oct 15th oct 0%

     

conclusion 16th oct 30th oct 0%   

first draft submission of complete report 30th oct 15th nov 0%

   

final submission 15th nov 7th dec 0%     

                                            

LITERATURE REVIEW

INTRODUCTION TO THE INDIAN ECOMMERCE

INDUSTRY Ecommerce had been making rounds in India over the past 15 years but finally started to fall in place 5 years back.

It is one of the fastest growing industries in the country today, growing at a pace of 52% and expected to touch $ 68.47 billion by 2020

The development of ecommerce has been a boom to the entire country, job opportunities increased by 35% , it provided income opportunity to many SME and individuals by giving them a platform to sell their goods and services without investing too much money, and ofcourse a lot of benefits to the consumers. . (2006. (1999). EBSCO publishing service selection page, Author – Ian Putzgar) 2012 2013 2014 2015 2016* 2017* 2018* 2019*

01020304050607080

Retail ecommerce sale in India ( in US $ )

ADVANTAGES OF ECOMMERCE

TO THE CUSTOMERS : Accessibility and convenience Time saving Availability of options Better customer service Easy comparison Coupons and deals

TO THE BUSINESS : Economical Increasing customer base Rise in sales 24/7*365 days Expand business reach Recurring payments made easy Instant transactions

Sources : Hartley, M., & Walker, C. (2013, January 24). The growing pains of Indian e-commerce: What you need to know. Forbes. Retrieved from http://www.forbes.com/sites/morganhartley/2013/01/24/the-growing-pains-of-indian-e-commerce-what-you-need-to-know/#3cf6b73f126c Retrieved from http://web.a.ebscohost.com.spjain.idm.oclc.org/ehost/detail/detail?sid=4f212204-b360-42c8-8508-82703da3d63f%40sessionmgr4003&vid=0&hid=4101&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#AN=19918704&db=bth Retrieved June 20, 2016, from http://search.proquest.com/openview/a563754a703d25e2d63a750e8e5928ce/1?pq-origsite=gscholar

DISADVANTAGES OF ECOMMERCE

TO THE CUSTOMERS : Privacy and security Quality Return of products Hidden costs Delay in receiving goods Lack of personal interaction

TO THE BUSINESS : Logistics Infrastructure Need for reverse logistics Security issues Payment Extra expense Constant upkeep

Sources : Hartley, M., & Walker, C. (2013, January 24). The growing pains of Indian e-commerce: What you need to know. Forbes. Retrieved from http://www.forbes.com/sites/morganhartley/2013/01/24/the-growing-pains-of-indian-e-commerce-what-you-need-to-know/#3cf6b73f126c Retrieved from http://web.a.ebscohost.com.spjain.idm.oclc.org/ehost/detail/detail?sid=4f212204-b360-42c8-8508-82703da3d63f%40sessionmgr4003&vid=0&hid=4101&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#AN=19918704&db=bth https://www.pwc.in/assets/pdfs/technology/ecommerce-in-india-drivers-and-challenges.pdf http://reverselogistics.in/rlc.media.kit.pdf

REVERSE LOGISTICS WHAT IS REVERSE LOGISTICS? The process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements (Watson, N. (2015, March 17). Retrieved June 20, 2016, from Ecommerce, http://ventureburn.com/2015/03/reverse-logistics-crucial-online-shop/ )It is an integral aspect of the ecommerce industry now in order to improve their customer service and retain the customers for maximum time. The average return rate in the industry contributes to approximately 15-17% of the overall sales, which at this rate will contribute to close to $20 billion by 2020 if the issue isn’t addressed (2006. (1999). EBSCO publishing service selection page. Retrieved June 20, 2016, from http://web.a.ebscohost.com.spjain.idm.oclc.org/ehost/pdfviewer/pdfviewer?sid=8cb4f5f0-1aae-4843-90f6-18d4785754b2%40sessionmgr4002&vid=0&hid=4101 )

COMPONENTS OF EFFECTIVE RETURN

To effectively deal with product returns, the company needs to ensure that not only the needs of the customer are being addressed but also that cost and impact of the product returns is being minimized on their business as it can have a substantial effect on the overall profit of the etailer. (O’Brien, M. (2016). Ecommerce return rates continue to climb. Retrieved June 20, 2016, from http://multichannelmerchant.com/opsandfulfillment/ecommerce-return-rates-continue-climb-15032016/)

Two main components of effective returns are : 1. Return Policy : it is considered as a trade off between reducing the impact of returns and

encouraging customers to buy. The policies need to be set out clearly to avoid inconvenience later. By doing so, it was noticed that the chances of first time deliver success rate by 18-25%

2. Return Preparation : in collaboration with the logistics team, the etailer needs to well prepared and careful in arranging the same. Since the customers have been used to the “ no quibble“ return policy coming from the brick and mortar retailers, they expect the return policy of the etailers to be similar. In order to lose on the customer, companies have started doing it too. (Watson, N. (2015, March 17). Retrieved June 20, 2016, from Ecommerce, http://ventureburn.com/2015/03/reverse-logistics-crucial-online-shop/ )

FACTORS LEADING TO REVERSE LOGISTICS

REVERSE LOGISTIC

S

RETURN POLICIES

PRODUCT EXCHANGE

OFFERS

WRONG PRODUCT

INCORRECT CONTACT DETAILS

DAMAGED GOODS

1. Return policies : In order to increase sales and customer base, websites offer 15-30 day return policy on their products

2. Product exchange offers : Rising competition gives birth to deals and promotions. Offers like “get your old gadget and Rs. X” invited the need of reverse logistics

3. Wrong product : Due to increase in purchasing and lack of complete monitoring, there are chances that wrong product might get delivered to the customers. The same needs to be collected and replaced with the right one.

4. Incorrect contact details : Sometimes, the customer might give incorrect contact details which makes it difficult to reach them, hence the product needs to be returned.

5. Damaged goods : At times, the products get damaged on the way before reaching the customer which needs to be replaced to avoid customer dissatisfaction

NEED FOR REVERSE LOGISTICS

NEED FOR REVERSE

LOGISTICS

MARKETING

STRATEGY

CUSTOMER RETENTION

INCREASE CLIENT BASE

COST EFFECTIVENESS

1. Excellent marketing strategy : In the current competitive scenario of ecommerce, providing returns to the customers gives them a degree of comfort and inturn works as a marketing strategy specially to attract the first timers. . (Mukherjee, R., Singh, S., Agarwal, J., Retrieved June 20, 2016, from https://thehackerstreet.com/problem-e-commerce-reverse-logistics/)

2. Retain customers : Effective reverse logistics helps build a strong platform for customer satisfaction and enhance customer experience. Once they are comfortable, they prefer to stay loyal to the website. (http://www.emeraldinsight.com/doi/pdfplus/10.1108/09600030610684962)

3. Increase client base : The most selling product category online is the apparel, which has maximum returns too. Customers prefer to shop from websites which have efficient and easy return cycles.

4. Cost effectiveness : If done properly can decrease the returns processing cost by approximately 25%, increase the productivity by a minimum of 10%, increases net profits by 2-5% and definitely increases customer satisfaction and faithfulness a lot

IMPORTANCE OF REVERSE LOGISTICS

Over the period of time in various studies, it has been observed that : 85% of customers say they will stop buying from a business if the returns process

is a hassle (Harris Interactive) 95% of customers say that they will likely shop with a catalogue or business

again if the online returns process is convenient (Harris Interactive) 40% of shoppers don’t buy online due to returns difficulty (Jupiter Research) Customers who have their complaint resolved quickly have a re-purchase

intention rate of 82% (McKinsey)Hence, keeping the same in mind, the importance of Reverse logistics can be summed up in the following points :

SHAREHOLDER VALUE

PROFITABILITY THROUGH

ASSET RECOVERY

REGULATION COMPLAINCE

CUSTOMER RETENTION

STRATEGIC ADVANTAGE

Strategic Advantage to the Ecommerce companies Though the ecommerce enterprise is quite complex, customers have only two clear windows into the

business -- the website and order fulfilment. Reverse logistics is an important part of order fulfilment. Hence a strong reverse logistics setup can be a strategic advantage to an ecommerce business.

Customer Retention In much the same way as reverse logistics can act as a strategic advantage, it can also help in customer

retention. A customer who is able to return or exchange with little pain is likely to be a satisfied customer. And a satisfied customer is likely to be a customer for a long time.

Regulation Compliance When reverse logistics results in damaged goods, it leads to waste. This proves that reverse logistics is not

just about customer delight; it has to do with aligning oneself within the legal environment of business. Profitability Through Asset Recovery

If the ecommerce business does not have a sound reverse logistics plan, it is probably losing out on the golden opportunity to profit from the piles of goods that fell out of the supply chain. In an era of wafer thin ecommerce margins, effective reverse logistics could be the difference between being profitable or not.

Shareholder Value As a manager of an ecommerce business, one should know that it is their fiduciary responsibility to deliver

value to shareholders. So one needs to cash in on the multiple opportunities that reverse logistics provides.

Sources : http://web.a.ebscohost.com.spjain.idm.oclc.org/ehost/pdfviewer/pdfviewer?sid=9e7dba71-de73-45ab-af58-656f70bce012%40sessionmgr4004&vid=0&hid=4101https://www.kpmg.com/IN/en/IssuesAndInsights/ArticlesPublications/Documents/E-commerce-retail-logistics-in-India.pdfhttps://thehackerstreet.com/problem-e-commerce-reverse-logistics/

RESEARCH METHOD

FACTORS TO BE STUDIED FOR EFFECTIVE REVERSE

STRATEGY Reverse logistics deals with two main elements: Processing cost

( transportation, repair etc ) and the asset realization. If done properly it can

reduce the processing costs upto 25% increase the productivity min upto 10% and asset realization into 2-4X customer satisfaction by 100% and profitability upto 2-5%

Receiving : Processing returned packages is a very challenging and labour intensive task. The key

purpose for a detailed receiving process is to issue credits or permit product exchange. The key challenge is proper identification to ensure proper matching to the original order

Issue of Credit or shipping an Exchange Item : Once the freight has been received and validated by the receiving team, a credit can be issued or an exchange can be shipped. Since many shippers who have employed e-Commerce strategies have big gapsin their receiving processes, items often go missing.

Inspection and sorting : The main purpose of inspection and sorting is to stream the returned items to the path of

highest selling price or recovery value. At this stage, the customer goods have been received and their credits have been processed and satisfied. Training and product knowledge are often important for the inspection and sorting process.

Products can be streamed according to their final destination, such as: Restock – unopened boxes can go straight back to new inventory Repackaging for sale – open box goods in “as new” condition that can be resold on the e-Commerce

site Return to Vendor – to be returned to the original vendor where they were purchased for credit or

exchange Disposition – items that have value, but will not be re-sold at the e-Commerce site Scrap – damaged or obsolete goods

REFERENCES

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