Return to Origin or RTO is now a very important part of E-Commerce. RTO, simply put, refers to the situation where a package is not delivered to the customer and is instead returned back to the seller.
Why does a package return to the seller?
- The customer is not available to receive the package.
- The customer does not accept the package.
- Incorrect contact details of customer
Shipment RTO in eCommerce
RTO becomes expensive because around 40% of all ECommerce shipping is returned as RTO, especially if the payment method is COD or Cash On Delivery. In India, this RTO is even more acute because most of the ECommerce transactions are through the COD route.
Amazon sees more product returns in India than it sees in any other market where it operates, Dharmesh Mehta, vice president of consumer and brand protection at Amazon, told Indian daily Economic Times.
RTO in COD Transactions:
The point to be noted is the sellers have to reduce RTO in order to increase their margins. There is a cost here that is attached to shipping and more often than not this cost is borne by the seller.
Data from Narvar (2018) and Return Magic Survey (2017)
The costs associated with RTO are:
Shipping costs for forwarding and returning the package.
Damage to product
Processing costs of returned inventory
Product is stuck in transit, thereby losing value and sometimes becomes obsolete.
Some returned items are to be disposed off- at an added cost
Loss of opportunity
Customer churn cost
Last but not least, the Customer is certainly inconvenienced, thereby the seller and the ECommerce marketplace take an image beating due to unfavourable customer feedback
How to Reduce RTO in eCommerce?
It is important to understand the basic reasons for RTO :
- The customer details are incomplete or incorrect.
- The product is not what the customer ordered or it has reached the wrong customer.
- The product is damaged.
- The customer orders one or many products on an impulse and selects a few products to keep while returning the others or all of the items ordered. This happens especially if it is a COD transaction.
- Fake orders
COD as a payment option cannot be removed as COD drives ECommerce sales to a large extent in India and we have to work around this option.
On the other hand, COD transactions can be reduced by offering alternatives such as :
According to Chain Store Age:
But the thrust has to be on preventing or at least minimising RTOs from happening. This can happen only when we develop systems to track the following:
- The product(s) that have a higher RTO record
- The shipper(s) that have a higher RTO record
- The marketplace(s) that have a higher RTO record
- The customer(s) that have a higher RTO record
- Fake orders
- Contact details & address validity
- Customer feedback
This is where Artificial Intelligence & Machine Learning comes into the picture. By analysing mountains of customer and shipping data using complex AI-powered algorithms, we will be able to detect certain patterns in customer ordering, customer buying, shipping and returns etc. These patterns will reveal solutions that help understand the key reasons that may cause RTO
Once we have definite data on the above, then we can take decisions to minimize RTOs like :
- Take extra care for products prone to RTO
- Go with shippers that have a good track record
- Understand customer buying and delivery preferences
- Reduce impulse buying by cancelling / confirming non-serious order
- Weed out fake orders
- Ensure correct customer address and contact details
- Proper link between product and customer
- Fool-proof packaging
- Engaging & real-time product information
- Work on right areas of customer feedback
- Clear returns policy
Clove.AI Intelligence to minimize RTO in your eCommerce business
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