A Deep Dive Into Consolidated Drop Off Lockers For Ecommerce Returns
New technology in reverse logistics is making the returns process smoother for e-commerce companies looking to deliver great customer service without the high price tag. Consolidated drop off locations and lockers are smoothing out e-commerce returns to lower the cost, streamline operations, and elevate the consumer experience.
What are the concerns with reverse logistics as it currently stands, and how do we anticipate drop off lockers will alleviate some of these issues?
The Concerns With Reverse Logistics
Reverse logistics—returning items from a customer’s house back to the company— is a complicated process. It’s more expensive than forward logistics, and companies often end up losing money along the way. Companies give customers a full refund on the product, even if that product is rendered unusable by the company (either because it’s defective or “used” during the return).
Reverse logistics includes a lot of moving parts. After the package is dropped off or picked up, the shipper or company needs to ship it to a warehouse, sort through the goods, determine the product’s fate, and often ship it to another warehouse or recycle it.
A lot of these items aren’t even worth returning, because they were a low-value item (lower value than the cost of shipping) or they were damaged/defective. This ends up wasting space on trucks and warehouses, only to waste even more time sorting products that end up getting thrown out—all of which costs a lot of money for shippers and businesses. Even if the product is deemed re-sellable, so many hands have now touched it that it’s not in the same sort of new condition it was before going to the customer.
A lot of businesses will also pay for return shipping and offer “free returns” as a marketing tactic. Free shipping both to and from the customer’s house can end up costing even more than the product itself—and the company didn’t even make money on the product! So they end up in the hole with negative margins.
E-commerce businesses want to be known for their fast, free, easy returns. A strong returns process can engender customer loyalty, with 92% of consumers stating they would buy again if the returns process was easy. While a bad returns process can completely deter customers, and they often never purchase from you again.
But it’s hard to make the returns process easy for the consumer. The customer has the product in their possession, so it needs to find its way back to the shipper or company. This means the customer has to take some sort of action in order to get the goods back.
The goal for companies now is to make the consumer action as seamless and simple as possible.
Recently, companies would offer prepaid print-at-home labels you could easily attach to a box. You could then drop it off at a postal service location, or some services would even pick it up from your house. But customers want a hassle-free returns process, and even these sorts of shipping solutions aren’t the most convenient.
So companies and shippers have been working diligently to figure out how to minimize shipping and processing costs. Omnichannel in-store returns have proven successful, but only for those businesses that have physical storefronts. Prepaid returns allow customers to print a free label and drop off a package simply and easily. But this still isn’t enough.
The next big movement in changing the reverse logistics game: drop off lockers.
What are drop off lockers?
A lot of companies, including retail giant Amazon, have started implementing drop off locations with private lockers for returns. Customers can bring their goods to a consolidated center to drop off their returns rather than shipping them in a box.
Let’s look at Amazon lockers as an example, since most drop-off lockers work in a similar way (and Amazon is the most popular). A customer makes a return request on Amazon. If the item is eligible for a drop-off and there is a locker local, the customer can opt into this program instead of shipping their return. Amazon then sends the customer a unique locker drop off code.
When the consumer arrives at the locker location, they’ll enter the code on the touch screen display for access to a specific locker. They put the goods inside, and they’re all set!
The customer has until the following business day for their reservation. Or they can cancel or change the request. The box or product needs to be less than 18”x14”x12” in order to fit in the locker.
Then logistics takes over before shipment happens. Operations workers can separate and process packages at the drop off location. There they determine if something is capable for reselling and where it should be sent to next.
Currently, Amazon has some of their lockers in apartment buildings, convenience stores, and Whole Foods. Other companies using drop-off lockers include Nordstrom, Macy’s, and Home Depot. However, these lockers are not specifically for online returns. Nordstrom and Macy’s have lockers in some stores that allow a customer to receive the order there, try it on in store, and put it back in the locker if they don’t like it.
We’re at the start of consolidated drop-offs, but it has not yet impacted or eased the reverse logistics process.
What are the benefits of drop off lockers?
Benefits for customers
Whether or not customers prefer drop-off locations over other methods, like at-home pickup services, is still to be seen. However, there are a lot of consumer advantages to the drop-off lockers, and these are expected to amplify as technology improves.
Most importantly, consumers don’t have to deal with packaging or shipping. They can put the product back in its box or they can bring it in a different container—and some lockers don’t require a container at all. They don’t have to worry about packaging or printing a shipping label, which saves a significant amount of time and effort.
Plus, drop-off lockers are likely to be free (or low cost) for consumers. Right now, some businesses require customers to pay for return shipping, but drop off locations will drastically reduce the expense put on the consumer.
Right now, there aren’t enough lockers in key locations to determine whether or not it will pick up on a large scale. But in highly tread urban areas, lockers are proving more convenient for city dwellers.
Benefits for companies
Drop off lockers severely reduce costs and logistics associated with the returns process.
For example, if a customer has a damaged item, they’ll return it to the company—which costs either the company or customer in shipping costs. After paying all of the shipping costs the company determines whether the defect is fixable and re-sellable or trash. So a company could end up paying more than the cost of the product in return shipping and logistics only to throw it out and waste even more.
With lockers, companies can outsource operations before shipping. They can cut entire legs out of the shipping process. Someone can look at the goods in the locker to determine their status before sending them to the appropriate location. This streamlines the shipment process to save a significant amount of time and expense.
Cutting out shipping legs is especially important during a trucking capacity crunch. Currently, the transportation industry has been suffering due to a number of variables (from a shortage of drivers to ELD mandate implementation to an influx of e-commerce shipments). Drop off lockers help cut the number of shipping legs, using truck space for only valuable products.
Will this work for your business?
Unfortunately, it seems that drop off lockers used for reverse logistics are still a luxury of the biggest companies. It doesn’t make sense for smaller companies to absorb the cost of the warehousing and logistics needed for that operation unless the majority of their audience is in one area or city.
However, it’s possible that if drop-off lockers gain more mainstream traction, on-demand companies may pop up. We anticipate that smaller e-commerce retailers will be able to partner with third-party logistics services to utilize lockers on an as-needed basis. FedEx has already started doing something similar with their self-service lockers for flexible shipping and delivery, but this is not a direct line from locker to retailer yet.
Managing the returns process is still critical for the success of your e-commerce business. An easy, simple returns process can encourage customers to come back to you (even if they made a return). Challenging, cumbersome returns tend to drive customers away—even if they previously loved you.
Remember that returns are part of the customer experience. Drop-off lockers may be the next step to improving this experience.
How does your business handle returns? Share your tips or questions in the comments below!