What is Return to Origin (RTO) and its Impact on your Business?

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:

1. Improve Product and Delivery Report: One of the most effective ways to reduce RTO rates is to improve the product and delivery report. This includes ensuring that the product descriptions are accurate and detailed, the product images are high-quality, and the delivery options are clearly communicated to the customer. Providing real-time delivery updates and tracking information can also help reduce RTO rates by increasing customer satisfaction and reducing the chances of failed delivery.
2. Reduce Shipping Costs: Shipping costs can be a significant expense for ecommerce businesses. To reduce RTO rates, businesses can offer free shipping on orders above a certain value, use reliable couriers with a high success rate, and provide multiple delivery options such as express delivery, same-day delivery, and next-day delivery. Offering cash on delivery (COD) orders can also increase the chances of successful delivery, as customers are more likely to accept the package when they have already paid for it.
3. Streamline Reverse Logistics: Reverse logistics can be a time-consuming and costly process for businesses. Businesses can reduce RTO rates by streamlining the process. Automated systems can be used to track and manage returns. Standard operating procedures for inspection and restocking should be implemented. Staff should be trained to handle returns efficiently. Using a third-party logistics provider (3PL) can also help businesses save time and money by outsourcing the reverse logistics process.
4. Encourage Customer Feedback: Customer feedback is a valuable source of information for businesses looking to improve their products and services. By encouraging customers to leave feedback on their experience, businesses can identify areas for improvement and reduce the chances of customer returns. Offering incentives such as discounts or free gifts for leaving feedback can also increase customer engagement and loyalty.
5. Return Policy Optimization: Businesses should also consider offering a return policy that is convenient for customers and provides a hassle-free return process. This should include a clear timeline for returns, a refund or exchange option, and an easy way to return items. Additionally, businesses should consider offering free return shipping to ensure that customers have an easy way to return items. This can help reduce the number of returns and improve customer satisfaction.

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.