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Transcript
Tony Sciarrotta became the executive director of the Reverse Logistics Association in 2016, after 12 years of active involvement on the Advisory Board and on Committees. In his 35-plus years in the consumer products industry, Tony has held various positions including 15 years in returns management at Philips. During his Philips years, Tony developed new reverse logistics strategies and implemented many new returns initiatives. He worked with retail partners and industry groups on best practices still being used. Tony then became an evangelist for improving the customer experience to reduce returns and their associated costs. Today, Tony is considered a subject matter expert in reverse logistics, and speaks for the industry at conferences all over the world.
David Maloney, Editorial Director, DC Velocity 00:00
What ships out often comes back! How to compete with industry disruptors. And look at the changing retail experience.
Pull up a chair and join us. as the editors of DC Velocity discuss these stories, as well as news and supply chain trends, on this week's Logistics Matters podcast.
Hi, I'm Dave Maloney. I'm the editorial director at DC Velocity. Welcome.
Logistics Matters is sponsored by DCV-TV. Five channels of streaming video are yours for the viewing on DCV-TV. Major improvements have been made to the DCV-TV platform to enhance the viewing experience, provide greater search capabilities, and to expand the capacity of the video library well beyond the 3,000-plus videos already in the archive. Be sure to check it all out at DCVTV.com.
As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham will be alarmed to provide their insight into the top stories of this week. But to begin today: Remember all those holiday purchases made last month? Well, retailers [are] dealing with a mountain of returned items this month. To find out how they're copin,g here is Ben with today's guest.
Ben?
Ben Ames, Senior News Editor, DC Velocity 01:16
That's right Dave. We're glad to have with us today. Tony Sciarrotta, who's executive director of the Reverse Logistics Association, which is an industry group that provides an online directory and other resources for activities like last-mile returns, as opposed to those last-mile deliveries we're all so familiar with.
Welcome, Tony. Thanks for being here.
Tony Sciarrotta, Executive Director, Reverse Logistics Association 01:36
Hello Ben, and Dave, and thank you very much,
Ben Ames, Senior News Editor, DC Velocity 01:40
Tony, this has been a subject that a lot of people, both in the industry and consumers at home, often don't think much about until there's some real floods and surges through the system, which is typical at the holiday peak here. And particularly in 2020 and 2021, in this winter season, we've seen a huge jump in e-commerce parcel returns, thanks to the surge in online commerce during the pandemic, when we were all staying at home and ordering online—combined with the holiday peak, of course. Was that a surprise to retailers and partial carriers, or could they see this one coming?
Tony Sciarrotta, Executive Director, Reverse Logistics Association 02:16
Well, that's a great question, because it's related to a lack of forecasting software in the industry. You hear about SAP and Oracle and all great systems like that. You don't hear anything about reverse logistics software—forecasting, processing, etc.
The reason it was a bit of a surprise—not complete surprise, but a bit of a surprise—is online returns are two to three to four times higher than in-store returns, for simple reasons like, Ben, if you're going to buy a shirt, L.L. Bean size 15/34 is different than another brand. And so people do bracketing: They buy a size bigger, a size smaller, and maybe two sizes, or two colors. And so suddenly, you may have 10 items go out, two items kept, the rest go back. That's the surprise that some retailers did not understand was going to happen, and that's a simple example. You also have issues of interoperability: The electronics product that you brought, you take it home, put it—it comes to your house, put it into your system, and it doesn't connect, doesn't speak to the other products. So, there's issues like that that drive returns higher as well.
In the old days, all we had was the famous Super Bowl returns period. People would buy a big-screen TV, use it for the Super Bowl, take it back to the store. That was an expensive period. But nowadays, there is this trend of high e-commerce sales with proportionately higher returns.
Ben Ames, Senior News Editor, DC Velocity 03:49
Really interesting. I gotta say, I was not one of those who would do the big-screen TV purchase for the Super Bowl, for a short period, but I can understand it.
Aside from sheer volume, were there other factors this year that made this returns peak different from other years?
Tony Sciarrotta, Executive Director, Reverse Logistics Association 04:05
Absolutely. There were financial issues, and there were quarantine issues.
First off, returns are supposed to be limited in terms of maybe 30 days after the purchase, and you run a financial book run based on that. And now suddenly, you've given them 90 or 120 days to return products, so you've got that liability on your books for a much longer time. That's driving the financial people, the CFO world, crazy.
And then part two is, if you took things back to a Walmart store, or a Best Buy store, or shipped it back, you had quarantine issues in the early days. Nobody knew where the virus would live. Clothing inside of a box for two days? It just wasn't known. And retailers in the brick-and-mortar were taking things back and putting them in a separate area, leaving them alone for a while. It was not easy. And then it led to some returns being simply credited to the consumer, being told to keep it. And again, imagine the financial implications of that. So, it's a very different returns peak this year, because nobody really took all of those factors into account, especially the quarantining of the products.
Ben Ames, Senior News Editor, DC Velocity 05:17
Yeah, for sure. I was familiar with some friends, during, as you say, the early days of the pandemic, who would treat their their mail that way, or their their daily newspaper or something. They would leave it out for a couple of days before touching it. But it obviously makes sense on the return side as well, so.
Well, then you mentioned some of the constraints that we've been talking about here, in terms of contact in the early days, but how are companies handling reverse logistics flows in this wild year? You mentioned sometimes leaving the boxes out for a while before even touching them.
Tony Sciarrotta, Executive Director, Reverse Logistics Association 05:48
Right, Ben, and the picture I'll try to draw for you is not so much the boxes sitting in the corner. That was the first few months, then pretty much not doing that anymore. The virus doesn't live on cardboard very easily. So that's good thing, right?
But imagine a truckload backing up to a warehouse where there's conveyor belts or belt lines, and products are being put on these belts, and they have to be opened, looked at, inspected. Do they work? Can they be resold? Can they go back to stock at new—as new? And that's a whole different discussion, right, about clothing with stains, and what are the stains from? But we won't go quite there, but just imagine the flow, where you used to have people literally standing next to each other, and you could process hundreds of units per hour. Now you've had to cut out one-half or more of the people to space them out. And that's the disaster in the reverse logistics side. You have to physically touch this stuff. You have to make a decision on it.
It never comes back in the same box. So there were enough constraints already in the reverse logistics space. Imagine, for example, a ceiling fan, you buy it at your local Home Depot or Lowe's store and you take it home, you try to make it work, and it doesn't. Do you ever put it back in the box with the blades in the right spot? No, it sticks out of the box. And that's exactly how it gets processed all the way down the line.
So if that's a good visual, then think about, now, instead of 10 people in a 12-foot space, you've got three people. And that's driving the logistics side of the flow wild, because it's just impossible to keep up with. So, there's so many challenges. I hope I gave a couple of good examples for you there.
Ben Ames, Senior News Editor, DC Velocity 07:36
Great examples, and I think a lot of us might be familiar with some of that, having just gone through a holiday season here where, when you unbox something, when you open a gift, it's often very carefully protected by foam rubber, by packaging, by void fill, and trying to get that that toothpaste back in the tube can be difficult when you, if you're trying to return any of that stuff.
Tony Sciarrotta, Executive Director, Reverse Logistics Association 08:00
Oh, mattress in a box, Ben, that would be the best example, because of course they arrive in a box or a tube, and if you have any idea of the amount of pressure, the pressure that's being used to put them inside the box, and you think of yourself trying to exert that pressure, it doesn't happen. It just doesn't. It's like 200-pounds-per-square-inch kind of craziness, though.
Ben Ames, Senior News Editor, DC Velocity 08:21
Wow.
Tony Sciarrotta, Executive Director, Reverse Logistics Association 08:22
Yeah. So they don't go back in the box, Ben.
Ben Ames, Senior News Editor, DC Velocity 08:25
No. And for a lot of those reasons, returns are known for being one of the most expensive parts of the e-commerce cycle. You know, last-mile delivery gets a lot of attention, but for some of the reasons that you've been mentioning about retailers inspecting those returned goods, maybe repairing them, maybe recycling them, repackaging—what steps are companies taking to control those costs?
Tony Sciarrotta, Executive Director, Reverse Logistics Association 08:48
Not enough. And the disaster area that happens within a company is the silos that exist. So, not every organization understands the holistic end-to-end costs of reverse logistics. Shipping costs go to one area. Repair costs go to another area, Reselling the cost at a loss goes to another area. So nobody really puts the cost completely together.
Now, some companies are doing that, saying it's costing more to take it back then to give credit, and just give credit. But that's a nightmare, because you're destroying brand equity by telling people just keep it and they throw it away, give it away, put it on eBay, put it on flea markets, etc.
But nobody thinks about the highest upstream capability: Improve the customer experience, Ben. Make sure you tell people that what they're going to get is what they're going to get and try to exceed that experience. Now, Amazon and some other online retailers are very good at that. They deliver exactly when they say they're going to. The product is packaged safely in the box. And it does what it says it's going to do.
But when I worked at Philips and we did a survey of consumers, we found that 75% of the returns were being generated because people said "It didn't do what I expected it to do." That's a customer-experience issue discussion. On the return side, I was being blamed as returns director for taking too many things back from retailers whose liberal returns policies are making it too easy. And then I got to fight back a little later with Net Promoter Score and drivers like that, to say, "But you need the customer experience to be better." You need to give them an instruction book that they can read in English, not in 12 languages. You need pictures. You need to make it easier. You need the clothing to be the size it's supposed to be. And you need—to show it on a model is a bad idea, period, on the website. Don't show it on a model, because when I get it at home, it never looks that good. So, these are all customer experiences, right? It's got nothing to do with whether it fits or not. It's, "You showed it in green on the website, and when I got it, it was more chartreuse than green." So these are customer-experience steps that companies can take, but unfortunately, most of them are not doing it yet.
Ben Ames, Senior News Editor, DC Velocity 11:12
So interesting. And to some of that point, we've seen retailers, as you mentioned, take some creative steps to woo those fickle shoppers, like extending the return windows, like you mentioned, you know, up from 30, up to 90 or 100 days. Also, I've noticed some trends, like partnering with storefronts, like a UPS Store or a FedEx Office, maybe to help make it easier when they are shipped back. But as we start to look at the vaccines and emerge from pandemic conditions, are any of those changes, here to stay?
Tony Sciarrotta, Executive Director, Reverse Logistics Association 11:41
Absolutely. Some of those changes are definitely here to stay. Certainly those partnerships. And, again, we're using a lot of names here, but the Amazon partnership with Kohl's is brilliant. You go to the back of store to drop the package off, they give you a coupon, and you look at it and say "Wow, I get 40% off something today. Maybe I'll shop a little bit." That's a brilliant partnership. That's definitely here to stay.
The longer windows, that's a huge risk, and it's because, even in the case of clothing or electronics, these things become dated really fast. In the apparel industry, you're returning winter clothing, and if you've got till June to return it and get your money back, it's a huge loss then, to move winter clothing. And electronics, my god, those things change capacity and versions every three weeks, it seems like sometimes. So you're taking products back. And that was a joke in the early 2000s with digital cameras, you'd buy one at retail, with let's call it two megapixel[s]. Well, within three months, the 12 megapixel came in or something, and you take your old one back and change it. So those long windows are actually very dangerous for retailers to use—except that they're forced to, to be convenient and to be accommodating during the vaccine. So I hope the long windows go away, but I hope the convenience factor stays for those consumers.
And again, you're right, the creative steps that have been taken is unfortunately, as simple as "satisfaction guaranteed." And if you if you live by that, and you're an online retailer, or a brick-and-mortar retailer, you take anything back anytime from anybody. The last company that had "satisfaction guaranteed" as their slogan on the front door was called Sears. And so I hope that that explains why some of these steps that have been taken need to be really followed closely, Ben,
Ben Ames, Senior News Editor, DC Velocity 13:41
Great example. Thank you.
Tony, as we wrap up here, I know that the Reverse Logistics Association offers some resources, as well. Can you share with our listeners, just quickly, on a final point here, where they might be able to find some of those?
Tony Sciarrotta, Executive Director, Reverse Logistics Association 13:57
Absolutely. The website is www.rla.org. Yes, we're on that side of the world. We're an organization, a nonprofit that's focused on providing answers and solutions. Our members are the retailers, manufacturers, and companies that offer solutions, but it's free to join the community.
If you're involved in reverse logistics, join the community on the front page, and simply look at the resources that are available, especially under reverse logistics resources where there are free videos, white papers, podcasts, opportunities to hear from industry voices that give great advice. So, thank you very much, Ben. It is rla.org, the website for all of your listeners.
Ben Ames, Senior News Editor, DC Velocity 14:45
Thanks so much, Tony. We really appreciate you're visiting with us today, and I've learned an enormous amount about this sector. So, appreciate your being here, and best wishes in the new year.
Tony Sciarrotta, Executive Director, Reverse Logistics Association 14:54
Thank you very much, Ben.
Ben Ames, Senior News Editor, DC Velocity 14:56
Thanks.
Dave, back to you.
David Maloney, Editorial Director, DC Velocity 14:58
Thank you Tony and Ben.
Now let's take a look at some of the other supply chain news from the week. Victoria, you reported this week on new Gartner research that disclosed ways to compete with industry disruptors. What did that report advise?
Victoria Kickham, Senior Editor, DC Velocity 15:13
Thanks, Dave. Yeah, so this week, as you say, Gartner released research on how chief supply chain officers, or CSCOs, can help their companies better compete with industry disruptors. And those are, you know, the digital giants we heard mentioned earlier, some of them—Amazon, Alibaba—as well as other non-traditional startups that are sort of focused on e-commerce and last-mile delivery, that kind of thing. So essentially, they say CSCOs should focus on developing capabilities that put customers and innovation at the center of their business strategies, and they say this requires thinking more like the non-traditionals do, along with a blend of both traditional and new supply chain strategies that can help all companies, really, better serve the needs of what they call “modern customers.” And Gartner surveyed more than 500 industry professionals for this report.
David Maloney, Editorial Director, DC Velocity 16:02
You mentioned "modern customers." What specifically should more retail companies do when it comes to supply chain? And what do they actually even mean by "modern customers"?
Victoria Kickham, Senior Editor, DC Velocity 16:10
Yeah, well, so it's interesting. Modern customers are all of those who, of us, who want faster service and a steady flow of new products introduced without delays, you know, along with other things.
And in terms of what CSCOs should do, the research really is focused on, you know, sort of very high-level strategic ideas. It's less tactical, but it's interesting, I think, for companies to consider.
It's a lot of information. I'll just condense it a little bit. And one point is that CSCOs should focus on strategies, as I said earlier, you know, to get closer to customers, and that includes, you know, better use and management of data. And also in acting, as I said, more like non-traditional companies and startups do in some ways, and one example of that is to sort of eliminate hierarchical structures and sort of tap into talent at all levels. And what I took away from this was that it means that you can kind of promote more of a, they call it a culture of innovation, and that can lead to all kinds of new ideas, you know, for approaching everything from operations to new product development and customer service. So, it's a pretty high-level look at things, but it's really, I think, some interesting points to consider.
David Maloney, Editorial Director, DC Velocity 17:11
Well, focusing on the customer is always a good thing. Thanks Victoria.
Victoria Kickham, Senior Editor, DC Velocity 17:15
Absolutely. You're welcome.
David Maloney, Editorial Director, DC Velocity 17:17
And Ben, you spent time this week attending sessions of the National Retail Federation's virtual conference, which is one of the nation's largest group of retailers, the NRF. What were some of the important issues that they discussed at this week's conference?
Ben Ames, Senior News Editor, DC Velocity 17:32
That's right, Dave. And like many conferences, of course, it looked a lot different this year, since we weren't all jammed into the Jacob Javits Center in New York City this time around, but we're online. And a lot of the themes were the same as what we've been talking about earlier in today's episode.
To Victoria's point about the Gartner study, it looks like 2021 might really continue to be the year of the customer. We were talking about some of the extraordinary steps that retailers have taken to stay afloat during the pandemic, continue to serve those customers, even when shoppers couldn't come into the stores anymore, or at least not in big numbers. So they, you know, talked about some really creative approaches, and we heard about some of them that might stick around.
One study said that while buyers had shifted the majority of their 2020 purchases to online platforms in the past year, more than half of buyers expect to resume their pre-pandemic buying patterns when that's possible. And one reason is that about six in 10 have had a mixed or even bad experience with BOPIS—that acronym for "buy online, pick up in store"—and others complained about a challenging returns process, which rings true to earlier in the episode, when we were talking to Tony Sciarrotta. So those statistics had come from a survey done by GreyOrange, which is a vendor making warehouse fulfillment tech.
But another firm said that wherever consumers choose to do their shopping, whether it be at home or in the store, the way in which they shop may have been changed forever by some of the technologies that shops and warehouses have been using to stay open during the pandemic.
David Maloney, Editorial Director, DC Velocity 19:02
Ben, did they give any details about how that shopping will be different in this new year?
Ben Ames, Senior News Editor, DC Velocity 19:06
They did, and it all comes down to one word: smartphones. That's because retailers have needed a solution to some of the big pain points during the crisis, like scaling up in-store fulfillment. The solution to that is to build apps that run on their employees' personal smartphones. So instead of a business buying a whole fleet of handheld scanners and radios, they instead will just use the devices that their employees are all carrying in their pockets already. So, that requires less training, since all of us already know how to use our own phones, and it means that the employer doesn't have to clean down the unit between shifts—again, because it's your own phone, and you're not handing it off to a colleague. That analysis came from a company called Scandit, which is a Swiss firm that makes data-capture devices.
And that trend also applies, actually, to both shoppers and store workers, incidentally. For example, the workers in the store—the associates, as they're sometimes called—could scan an item on the shelf and then fill a basket to fulfill online orders with it. They can then put that in a parcel locker, or maybe carry it outside for curbside pickup, and because that's a digital process, it doesn't matter if they're doing that on the store floor or even in a fulfillment center, distribution center.
Likewise, shoppers can actually follow a similar pattern. They can, if they're in the store, they can scan the item on the shelf with their phone, and gain access to things like recommendations from other buyers, product ratings, or even personal discounts, depending on their shopping history, and then they could use their own phones to scan that image again at the cash register when they're done, for contactless shopping, which has also been increasingly important.
David Maloney, Editorial Director, DC Velocity 20:48
Yeah. Well, technology is making it so much easier for retailers to be able to serve their customers. I know, for instance, I placed my latest grocery order for pickup just last night. So, it is a lot easier than it used to be.
Ben Ames, Senior News Editor, DC Velocity 21:00
Yep, of course, it looks like some of it's here to stay. It'll be fascinating to keep following this area,
David Maloney, Editorial Director, DC Velocity 21:04
It will be fun to watch.
We encourage our listeners to go to DCVelocity.com for more on these and other supply chain stories, and also check out the podcast notes section, if your platform allows for that, where we have some direct links on some of the topics that we discussed today. So go there to check it all out.
Thank you, Ben and Victoria, for sharing highlights of the news this week.
Ben Ames, Senior News Editor, DC Velocity 21:26
Thank you, Dave.
Victoria Kickham, Senior Editor, DC Velocity 21:27
Yeah, thank you.
David Maloney, Editorial Director, DC Velocity 21:29
And again, our thanks to Tony Sciarrotta of the Reverse Logistics Association for being with us today.
We encourage your comments on this topic and our other stories. You can email us at podcast@dcvelocity.com.
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