14 Best Ways to Reduce RTO Charges in eCommerce in 2022
Businesses these days are involved in cut-throat competition, mainly on online selling platforms. They try to offer all the services they can to create a better online purchasing experience for their customers. One of them is the return option for buyers. One of the painful realities that online retailers must accept is that there will be customers that seek to return their orders. In order to reduce RTO frequencies, sellers employ a variety of tactics.
If a retailer wants to be profitable in the eCommerce space, they need to reduce RTO costs. If not, their profit margins will fall or it may also start creating difficult scenarios. It is widely known that it’s impossible to reduce RTO requests to zero but taking care of a few things can optimize and reduce RTO charges to a certain extent. To achieve significant RTO reduction, you need to first understand it in detail.
- What is RTO or Return to Origin?
- What are RTO Related Costs?
- How to Reduce RTO Frequency in eCommerce? 14 Proven Ways
- Optimize Product Descriptions
- Provide Order Tracking
- Offer Multiple Modes of Payment
- Convert Returns/Refunds into Exchanges
- Check Customer Availability Before Attempting Delivery
- Alert for Consumers with High Initiation of RTOs
- Offer Faster Shipping (Same/Next-Day Shipping)
- Offer a Branded Post-Shipping Experience
- Reduce Cash on Delivery Losses
- Verification of Shipping Address
- Profiling of Risky Orders
- Providing Dashboard Analytics
- Customization of Business Model
- Automation of Important Processes
- Optimizing Website Experiences in 5 Ways to Reduce RTO in eCommerce
- Strategies to Decrease RTOs in eCommerce with WareIQ
- Reduce RTO FAQs
What is RTO or Return to Origin?
The term return-to-origin or RTO, is often used in the eCommerce industry. The initiation of the return of a product and its return to the seller’s warehouse is referred to as RTO. A package may be returned to the vendor for various reasons. An eCommerce business will incur more costs as a result of this. Setting strategies to reduce RTO costs is vital for the a business to maintain their profit margins and not incur extra costs.
What are RTO Related Costs?
When an online seller or selling channel provides the facility of free shipping, they add the shipping charges to the final selling price of the product. In certain cases where the sale is done but the product is in the process of being returned, all costs associated with the returns process are known as RTO related costs. For a seller, RTO reduction equals higher profitability. Let us understand the different RTO related costs and how to achieve RTO reduction.
Charges for the Shipment to be Delivered and Returned
Product delivery is chargeable for sellers, which they account for in the final selling price. If an RTO is initiated, it costs the seller twice the amount which they will not make back during the sale. Therefore, sellers need to find ways to reduce RTO costs.
Costs for Repackaging
Products are packed after picking them from the shelves of a warehouse, godown, or fulfillment center. Products are customized with multi-layer packaging and the invoices are posted on the outer packet which includes the receiver’s address, barcodes, order number etc. In the event of an RTO, this packaging needs to be removed and put back in the inventory. Later when the same item is ordered again by another customer the seller needs to pack it again. Thus, sellers need to find ways to reduce RTO packaging costs.
Cost Incurred due to Product Damage
Through online selling, order fulfillment is done by achieved by travelling large distances. These products are picked up and kept with hundreds of other products, which could cause damage if they are not placed in a proper manner. This could result in an initiation of RTO because of product damage before it has even reached the buyer. Companies need to analyse how to reduce RTO caused by product damage.
Costs During Handling of Recalled Inventory
Storing and managing inventory costs a huge amount of money to a seller. Holding a product for a while can proportionately increase the cost, to the amount of time and addition of new products being added. Sellers seek to reduce RTO storage costs by investing in better inventory management facilities.
Costs Incurred due to Expiration
Passing of time makes a lot of products redundant. Christmas trees are mostly sold during the Christmas season. It applies for most festive seasons so if the product is delayed in transit, it may lose its importance and value due to which a seller will have to store it for a long period which may result in it becoming old fashioned and irrelevant.
Practices That Can Help Sellers Reduce RTO Costs
You can have the best products and most efficient fulfillment strategy but you will still get RTO requests. RTO reduction can be achieved but it can never be entirely mitigated. To reduce RTO charges, sellers can keep a few things in mind:
Store Inventory Near High Traffic Order Placement Locations: It will not only help a seller in saving shipment charges but also to reduce RTO costs as distances to fulfill orders will decrease. Covering less distance is also effective in terms of limiting product damage.
Choose Logistics Partners with Competitive Freight Rates: Freight rates in the supply chain matter a lot. Dynamic increases in fuel prices, and not using optimized vehicles can double the freight rate. If your logistics partner offers cost-effective rates, it can reduce RTO charges.
Opt for RTO Insurance: This is a recent concept where eCommerce logistics companies and fulfillment companies give sellers an option of RTO insurance. If an RTO occurs, these fulfillment companies will bear the cost instead of the retailer, resulting in RTO reduction.
Choose a Third-party Fulfillment Partner: The third-party fulfillment companies give all-in-one solutions to a seller. It stores your inventory at the best location with high order traffic at the cheapest freight rates, provides individual buyer RTO rates, gives the option of RTO insurance, and provides facilities like RTO shields. All these factors can reduce RTO costs.
How to Reduce RTO Frequency in eCommerce? 14 Proven Ways
To make your business more profitable, you can apply some tricks to reduce RTO charges. These tested tricks are as follows:
Optimize Product Descriptions
In online selling, people always complain about the difference between a products’ appearance on the website versus reality. When a customer buys a product, they read the product descriptions to get an exact idea of the product. So try to write a good description of the products with accurate facts and figures about its features and dimensions.
Provide Order Tracking
Many times, ordered products are not received by a buyer because the buyer is not present at the location. If the seller provides tracking and order scheduling facilities, the buyer can plan and receive it accordingly.
Offer Multiple Modes of Payment
These days, people are more reliant on UPI or card payments. So if the placed order is COD and the receiving person does not have cash (higher chance in the case of expensive products), the delivery partner should have multiple options of payment available.
Convert Returns/Refunds into Exchanges
If the seller turns the returns into exchanges, a buyer who often requests for RTOs will have to receive the parcel or they will not get the paid amount. In the case of COD, they can be noted and deprived of the COD option in the future.
Check Customer Availability Before Attempting Delivery
Most of the time, last mile delivery partners deliver products during the day which may be working hours for the buyer and they may not be present at the given location. So for the delivery, the delivery partner can first check the availability of the customer and schedule a time or change location after verifying the details. This will reduce RTO frequencies significantly.
Alert for Consumers with High Initiation of RTOs
These days with the help of technology and software, sellers have options to get the numbers of RTO frequency of individual buyers. If a person has a high rate of RTO requests, a seller could ban or restrict them from placing certain orders.
Locations are also blacklisted by a few selling platforms as per bad fulfillment experiences.
Offer Faster Shipping (Same/Next-Day Shipping)
When a buyer orders a product, they expect to get it as soon as possible. They may find some other way to obtain it sooner or buy it from an offline market and when the order finally arrives, an RTO request gets sent. So, a seller should ensure to deliver products on the same day or the next day after the order has been confirmed to reduce RTO requests.
Offer a Branded Post-Shipping Experience
When a buyer reads the feedback about certain products and brands, they invariably find some feedback related to a bad delivery experience. Chances are that many customers may not have received their orders due to similar problems. The solution to reducing these kinds of RTO requests is to provide a branded shipping experience to your customers. Pick and pack it nicely, send confirmation messages, Message them the tracking ID/number, allow buyers to choose a favorable time to receive it and finally ask them to write a review.
Reduce Cash on Delivery Losses
Data shows COD orders are mostly converted to RTO requests and from a customer’s point of view, they don’t want to pay before they get the product. In this scenario, a seller has multiple options to reduce RTO requests:
Verification of Shipping Address
A seller can verify the shipping address before dispatching the product to a logistics company. In case it is incorrect, which can turn into an RTO request, the seller or the logistics company can instruct the buyer to correct the shipping address to achieve a successful delivery.
The address can be verified with address proof documents of the buyer.
Profiling of Risky Orders
Make a database of risky fulfillment and mark them according to different parameters. Then choose whether you want to give them an option for COD or ask them to pay before the order delivery.
Providing Dashboard Analytics
Discover indications that contribute to your RTO losses by getting RTO information at a state/city/pincode level. To better understand delinquent behavior and implement the learnings into your business plan, get full order review reports. This will reduce RTO requests that are fraudulent.
Customization of Business Model
Learn algorithms, evolve, and localize the learnings over time to continually increase accuracy based on your company’s demands. To make it even more flexible, you can create your own flagging rules. Furthermore, blacklist specific persons based on email addresses, phone numbers, and other factors to reduce RTO costs.
Automation of Important Processes
As your eCommerce firm expands, automation becomes increasingly important. Set up automated workflows to automatically accept or reject red-flagged orders based on risk factors, saving time and money in the process. To maximize your business and decrease operating expenses and reduce RTO charges, automate order confirmations, payment collections and other operations.
Conversion of Risky COD Orders to Prepaid Orders: If there are higher chances of RTO requests with an individual customer, only give them the option to pay before order placement. Prepaid orders result in RTO reduction and if an RTO request still occurs, allow an exchange instead of a refund.
Optimizing Website Experiences in 5 Ways to Reduce RTO in eCommerce
You may have observed that brand appearance matters a lot in its positioning. In online selling, the appearance of a brand depends upon its website. Websites increase brand value and with good brand value, RTO reduction of a product can be achieved: These are some ways to make your website more effective:
Implement a Return Policy
For eCommerce businesses, return policies should be a set of rules created by a retailer or a selling platform to manage returns and exchange unwanted merchandise that a customer has purchased. It should tell the buyers what items can be returned and for what reasons, according to a timeframe over which returns could be initiated.
Enhance Product Illumination
When a product fails to meet the standards set out on the business’ website, it is a key contributor to product returns. It’s disheartening to receive a shipment after waiting weeks for it, just to open it and discover it’s not what you expected or required. Ways to reduce RTO requests in this regard are:
- Create an attention-grabbing headline summary.
- Summarize the product definition with a bulleted list of key characteristics and features.
- Use a paragraph to expand on what makes the product unique. Instead of focusing on describing benefits, focus on giving a solution.
- To persuade the consumer to buy, end with trust, social truths, urgency, and a call-to-action.
Value Consumer Reviews
If you have a high number of RTOs then there must be some reason why the majority of customers are not accepting the delivery. You can try to get feedback from the buyer who didn’t accept the delivery or read reviews of buyers who have written about their post order experience. Read all and then try to provide a solution.
Introduce Product Videos
If customers are returning items because they don’t meet the product description’s expectations, you might want to consider adding a video function to your product detail page. Brand films are now a highly effective technique for increasing conversion rates, reducing RTO requests and more individuals determine that after watching a product commercial, they can better imagine themselves using the product.
Provide a Post-Purchase Confirmation Message
Sending a post-purchase message(mail) to your customers can be a very effective way to reduce returns. Reduce objections that lead to refunds and keep customers enthused about what they just ordered by informing consumers about the product between order and shipment.
Strategies to Decrease RTOs in eCommerce with WareIQ
According to a recent study by KPMG, return shipments can make up to 20% of total shipments in e-commerce. This rate climbs to 40% in case of Cash on delivery (COD) orders. Return to Origin (RTO) is a nightmare for sellers as it significantly increases the logistic costs. RTOs rates are expected to increase even further in India with demand surges in tier 2 and 3 cities. Given the situation, reverse logistics has become an integral part of a business plan. Given the convenience of online shopping and the lack of risk, buyers can frequently return items without second thoughts. RTO logistics become extremely important to decrease this trend as well as the costs involved.
The sheer amount of revenue lost by companies through return items is about 20% of the sale, and that’s exactly where WareIQ pitches in to help you save the costs. We optimize your return order logistics and improve overall efficiency with the help of insights derived from customer data, customer retention metrics and return policies.
How Does WareIQ Help eCommerce Businesses in Reducing RTOs in 5 Ways?
- Quick TAT (Turn around time): Logistic partners provide an estimated delivery timeline based on which the customers anticipate the delivery. If it fails to reach them as per this expectation, there is a risk of an RTO and the customer opting to order from a competitor. This also affects the customer retention rate. With WareIQ’s Prime-like shipping, data-driven insights, PAN-India network of warehouses and excellent supply chain management system, orders reach the customers on time as promised. This ensures a higher rate of First attempt delivery, thus reducing the breach of TAT.
- Higher and Efficient First Attempt Strike Rate (FASR): Delivery success in the first attempt ensures happy customers and helps in their retention. This is an important metric since lower returns imply lower logistics costs on RTO. With WareIQ’s structured incentive plans, delivery partners are encouraged to deliver maximum shipments in the first attempt thereby increasing the FASR.
- Improved Non-delivery Report (NDR) conversion: Knowing the customer’s intent before performing the last mile delivery can save a lot of time costs related to RTOs. This can be achieved by validating the attempted shipments by directly communicating with customers via phone calls, SMS, e-mail, WhatsApp, etc. Any change of preference or cancellation or order can be recorded and shared to the shipping partner in real-time to decide whether to “Reattempt the delivery” or “Make RTO”. Performing this manually at scale is almost impossible. With WareIQ’s innovative solutions, most of it can be automated via IVR (Interactive voice response) calling, auto-SMS, auto-mailer, WhatsApp alerts, etc. This also keeps the customer well informed and creates an impact on improving the delivery conversion percentage. In the auto NDR process, the customer will get an IVR call immediately after a failed delivery or when the NDR remark is updated by the delivery personnel. Automation makes the entire process quick and efficient.
- Wrong or Incomplete Address: Amidst the huge traffic across the supply chain and sometimes because of consumer’s ignorance, deliveries often end up attached with wrong or incomplete addresses. This is also one of the major reasons for RTO. Address validation becomes important in this context. WareIQ ensures this authenticity with various checks on the same. This increases the chances of successful delivery. In case of an incorrect address, shipping is cancelled prior to dispatch. It allows not only for lower RTO but also avoids wasteful shipping costs.
- Automated Partner Pin Code Allocations: With WareIQ’s cutting edge technology, pin code allocation is automated. This altogether eliminates the hassles of manual allocations thus reducing logistics costs & shipping costs & RTO as well as increasing fulfillment serviceability and speed of delivery. Making changes in allocations is complex and takes a good amount of time. The system analyzes historic RTO percentages and cost per shipment (forward + RTO) to optimize the allocation and ensure that the courier with the lowest possible cost is chosen for the given pin codes. Such efficiency and cost reductions are not possible with manual processes. This also saves a lot of time in processing and shipping the orders.
WareIQ’s RTO Shield provides eCommerce/D2C firms with a comprehensive checkout strategy to reduce RTO losses and increase revenue.
Why WareIQ’s RTO Shield?
- Request a refund for any RTO order that was predicted to be safe by the company.
- Smart COD checkout option based on technology to detect problematic customers and save on shipping costs
- Disable COD for untrustworthy and blacklisted customers automatically.
- Identification and deletion of duplicate orders
- Verification of shipping addresses and intelligent shipping selections based on address completeness
Benefits of RTO Shield
- Increase conversions and decrease cart abandonment.
- The quickest checkout time is under 10 seconds.
- Identify high RTO risk consumers using data sets from telecom, banks, hyperlocal, and OTT providers.
- Identify scammers using previous data on their past purchasing behavior and win over them.
How Does it Work?
- Integrate the website/application with WareIQ
- 3 months of historical data will be needed to train the model to predict accurately.
- Go live in 3 to 5 days