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Return to Origin (RTO) is a term used in ecommerce businesses that refers to the process of returning undelivered or returned orders to the sender or the origin. RTO rates, or the percentage of orders that are returned to the origin due to failed delivery or customer returns, can have a significant impact on the operational and shipping costs of ecommerce businesses. In this blog post, we will explore what RTO is, why it matters to ecommerce businesses, and how businesses can reduce RTO rates to improve their bottom line.
Failed delivery and customer returns are the two main reasons why orders are returned to the origin. Failed delivery occurs when the courier is unable to deliver the order to the customer due to various reasons such as incorrect address, unavailability of the recipient, or refusal to accept the package.
On the other hand, customer returns occur when the customer is not satisfied with the product and wishes to return it to the seller. Both failed delivery and customer returns can result in additional shipping charges, reverse logistics costs, and operational expenses for ecommerce businesses.
The real cost of returns
Shipping charges can add up quickly, especially for businesses that offer free shipping. When an order is returned to the origin due to failed delivery or customer returns, the business incurs additional shipping charges to send the order again or to process the return.
Reverse logistics costs, which refer to the cost of handling returned orders, can also be significant. These costs include inspection, sorting, repackaging, and restocking of returned products. In addition, operational costs such as customer service, inventory management, and warehouse storage can also increase due to returned orders.
How can you reduce RTOs?
Reducing RTO rates can have a significant impact on the bottom line of ecommerce businesses. By reducing the percentage of orders that are returned to the origin, businesses can save on shipping charges, reverse logistics costs, and operational expenses. Here are some strategies that businesses can use to reduce RTO rates and improve their bottom line:
Conclusion
Ultimately, we hope you’ve learned more about Return To Origin (RTO) and its impact on your business. Watch our webinar on Supply Chain Management to learn more.
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