Mastering Returns Efficiency: How 3PLs Can Win Big with Smart Returns Management

In the fast-evolving world of eCommerce, returns have become both a challenge and an opportunity for 3PLs. The ability to master returns processing can turn this challenge into a competitive advantage, enabling 3PLs to strengthen existing client relationships, grow their business, and improve profitability. Here's how.

‍

The Current State of Returns in eCommerce:

Returns are an inevitable part of eCommerce, and their scale has quickly become staggering. In fact, the NRF estimates that almost $1T of goods will be returned to retailers this year. Industry data shows that return rates for online purchases hover around 20-30%, significantly higher than for brick-and-mortar stores. During peak seasons like holidays, these rates often spike even further, creating logistical challenges for merchants and their 3PL partners.

‍

For many brands, the returns process remains a significant and growing pain point. Inefficient returns handling can lead to delayed restocking, increased waste, and dissatisfied customers. Furthermore, merchants are at increasing risk for fraud and abuse, which last year cost retailers over $100B.

‍

Finally, macroeconomic and global policy changes are having the effect of increasing the cost of inventory for merchants. In particular, rising interest rates, the threat of a trade war targeted at China, and the recent changes impacting the Section 321 duty exemption are increasing inventory costs. The best brands are quickly realizing that returns are inventory, not a cost center, and must be optimized with the help of their 3PL partners.

‍

For 3PLs, this represents an opportunity: by stepping up as returns management experts, they can differentiate themselves and offer immense value to their clients.

‍

Why Returns Efficiency Matters for 3PLs:

To be frank, most 3PLs don’t want to process returns and typically are not very good at it. We have all seen the returns corner of the warehouse before and know it’s something that staff typically tries to hide away when a prospective brand comes by for a site tour.

‍

So why does the dreaded return corner exist? In our experience, it comes down to three main reasons:

‍

1. Merchants historically haven’t demanded more from their 3PLs
2. The return process is much more complex than fulfillment
3. 3PLs haven’t had access to the right technology

‍

It is our belief at Two Boxes that merchants are demanding more, the process doesn’t have to be as complicated as it historically has been, and the right technology is now available.

‍

With the right technology and processes in place, 3PLs can create highly scalable, efficient, and profitable returns service offerings. Here’s why that matters:

‍

1. Reduced costs: streamlined returns processes lower handling and storage costs by up to 2x or more, making returns a profit center for your business.
2. Improved client retention: merchants are more likely to stay loyal to 3PLs who make returns painless and cost-effective for them.
3. New revenue opportunities: intelligent returns processes create opportunities for value-added services, recommerce or resale opportunities, and fraud mitigation services.
4. More satisfied employees: attracting and retaining employees is always one of the top considerations for 3PLs. Studies show that attrition decreases when employees have access to the right technology. Investing in returns technology is a great way to attract and maintain exceptional talent.
5. Enhanced sustainability: smart returns processes reduce waste, aligning with the growing consumer demand for environmentally responsible practices.

‍

For 3PLs, embracing returns isn’t just good business—it’s essential for staying competitive in a crowded market.

‍

Key Strategies to Improve Returns Efficiency

Regardless of the size, budget, and sophistication of your company, there are actions you can take to improve your returns offering.

‍

Prioritize Reverse Logistics

For many of your clients, especially those in footwear and apparel, they’re likely dealing with 20% or higher returns rates. It’s important for your leadership, employees, and clients that returns are not just about getting parcels back—they’re about ensuring those goods are put back into circulation quickly and efficiently. If you don’t have someone responsible for returns in your organization, appoint someone to lead. Returns are all too often an afterthought with no clear ownership.

‍

Collaborate with Clients

This one seems obvious, but is all too often overlooked. Start by reviewing your highest return rate clients and make sure that you have clear SOPs established for inspection, grading, and restocking rules. Work closely with your clients to also align on shared KPIs and customer experience goals. Finally, ensure that return goals and processes are integrated into new customer onboarding processes and that there is clear communication between sales and operations about what clients are expecting and what your team can deliver. The more transparent and collaborative the relationship, the easier it is to optimize returns management.

‍

Invest in technology:

Returns-focused technology for 3PLs is now available in the market. Once you reach a certain volume (usually around 100-200 returns per day), it makes a lot of sense to explore technology to level up your operations. You can leverage advanced technologies like intelligent sorting and prioritization, detailed SOP generation, automated grading, and real-time data analytics to optimize every step of the returns process. Tools like these enable quick employee onboarding, faster processing, and detailed data capture. This will reduce processing times, improve accuracy and quality, empower your employees, and give your team and your clients access to the data they need.

‍

Invest in your people:

Technology and process are great, but people are critical. In our experience, the highest performing 3PLs have clear leadership and robust onboarding and training programs. More importantly, they create clear feedback loops so that frontline employees, who are closest to the work, can suggest improvements, and call out opportunities for your organization and your clients to improve.

‍

Communicating Your Returns Expertise

Becoming a leader in returns management is only half the battle—you also need to communicate that expertise effectively. Here’s how:

‍

Showcase Metrics: Share measurable results, such as reduced processing times or improved recovery rates, in your marketing materials. A great technology partner can help you capture this data.

Educate Your Audience: Publish blogs, case studies, and thought leadership pieces that demonstrate your deep understanding of returns management. Make sure your sales and customer success teams are educated and bought in as well.

Leverage Testimonials: Highlight success stories from clients who have benefited from your returns expertise. Brands trust their peers and having merchants advocate for your business is critical.

Attend Industry Events: Speak at conferences and participate in panels to position your company as a thought leader in reverse logistics. You can also meet some of the best technology providers in the space at events like NRF, Manifest, Shoptalk, and Parcel Forum, just to name a few.

‍

The Future of Returns for 3PLs

As eCommerce continues to grow, returns will remain a critical challenge for merchants. For 3PLs, this represents a tremendous opportunity to innovate and lead. The future of returns management will likely involve:

‍

1. Greater Automation: AI and machine learning will continue to play a key role in making returns more efficient by improving in-warehouse workflows and empowering staff to do more with less.
2. Fraud and abuse mitigation: Fraud is a huge and growing problem for e-commerce merchants in particular. 3PLs are well-positioned to partner with brands to fight fraud and abuse.
3. Circular Economy Models: Merchants are increasingly looking for ways to improve profits and achieve their sustainability goals with recommerce and resale offerings. 3PLs can help by facilitating product recycling, refurbishment, and resale.
4. Seamless Customer Experiences: Returns will become faster and more customer-friendly, with 3PLs playing a central role in providing great operations to ensure satisfaction.

‍

By investing in returns efficiency now, 3PLs can position themselves as indispensable partners to merchants in the years to come. Mastering returns efficiency isn’t just about solving a problem—it’s about unlocking new opportunities for growth and differentiation. For 3PLs ready to embrace this challenge, the rewards can be substantial. Find your returns management provider using our tool today!

‍