How E-grocery Retailers Are Tackling the Challenge Of Reverse Logistics

How E-grocery Retailers Are Tackling the Challenge Of Reverse Logistics
Specific demands that food companies have (according to e-commerce enabler Unicommerce) with respect to their supply chain are managing bulk returns, handling expiry of products, and making sure that near expiry goods are not warded if being returned

By Navneel , Features Writer

13 May 2022 | 9 min read

The problem of reverse logistics (return of products from consumer to supplier) has always been a challenge for e-tailers. However, the challenge has magnified in the current age of Q-commerce where consumers want everything at their fingertips within minutes if not hours. It is even a greater hassle for the e-grocery players since their supplies have a short shelf-life. They are heavily dependent upon a reliable reverse logistics model to be sustainable over a longer period. 

What Comprises Reverse Logistics?

Reverse logistics stands for all operations related to the reuse of products and materials right from the consumer back to the supplier. That can also include all recycling, reclamation of raw materials, refurbishment, and reselling of items that have been restocked. 

Some of the specific demands that food companies have (according to e-commerce enabler Unicommerce) with respect to their supply chain are managing bulk returns, handling expiry of products, and making sure that near expiry goods are not warded if being returned.

Understanding the Challenge

Challenges in reverse logistics are way more than singular. Let’s say you order from an app or website, and whoever is managing the inventory will get the order. And, let’s say of all the orders that were dispatched, a certain percentage of orders were returned-to-origin (RTO) for various reasons say the customer was not available or the address was wrong then the order has to be brought to the hub. In that case, there are multiple problems arise for a grocery retailer. 

Roshan Farhan, Founder and CEO of e-grocery firm Gobillion shared, “There are two kinds of problem: firstly, your GMV (Gross Merchandise Value) is stuck – the sales which could have been fulfilled today is stuck. And, number two, if it's an internal issue, let's say our delivery guy could not figure out the address or could not reach out to the customer. The customer is expecting the order that leaves a bad customer experience and number three, I am incurring significant costs in the reverse logistics. Ideally, if I drop the order, on the last mile itself, it would charge an average of Rs. 40-45 and then I will incur another Rs 20-25 on the reverse logistics.”

The overall logistics costs for a firm thus go up and the unit economics takes a hit. As such, companies have devised strategies to eradicate various hassles involved with the reverse logistics aspect. 

Niranjan Sharma, Co-Founder and CEO of online grocery supplier Kisanserv said, “We are working on B2B2C, where we deliver fruits and vegetables to end consumers through different channels of retail sales. We have a no-question ask return and replacement policy. We either take back material at the time of delivery or the next day within 24 hrs. This gives confidence to our customers and they buy from Kisanserv without any fear.”

If we look at the major grocery e-retail players like Dunzo, Zepto, Swiggy Instamart, Gobillion, etc., what we see in common is their heavy investment in technology in their processes and training their workforce. This is how they ensure much of their supply chain hassles, including their reverse logistics aspect, get sorted. 

How Can Enablers Come To Rescue

It is apparent that to build a solid reverse logistics chain, the e-grocery firms cannot do away without relying upon good service providers/enablers that handle that aspect for them. 

Prodipto Roy, Co-Founder of Pune-based e-commerce enabler Quickshift said, “Across industries, businesses are experiencing a volatile customer behaviour when it comes to reverse logistics. With quick deliveries becoming a norm in the metro cities specifically, Quickshift has opened up options from standard delivery to three-hour delivery. This is giving customers options to exercise and having a positive impact on reducing returns."

Again, Kapil Makhija, CEO of Unicommerce, which has experience working with some of the leading FMCG brands in the industry and helping them streamline their supply chain and business operations shared: "Our solutions provide centralized visibility of inventory movements to our clients along with clear visibility of RTOs and Customer initiated returns. This helps brands to analyze and do a comprehensive quality-check to understand key reasons for the origination of returns thus being able to proactively fix them at a faster speed." 

The list of specific measures/ processes that an enabler can provide to an e-grocery firm that can largely reduce their operational costs (taking the example of Pune-based Quickshift) are as follows:

1. Calling customers before starting the delivery process, to ensure their availability and address. 

2. RTO or Return To Origin turnaround time is within 24hrs so the business is not hassled with a lost product

3. Product gets reinstated in the inventory system within 24hrs so it is available for sale in record time

4. Introduction of three-hour delivery has enabled a drastic reduction in returns from 30 percent in standard delivery to 10-15 percent in same day and three-hour delivery

When all is said and done, it is true that to make the reverse logistics supply chain more efficient, the overall logistics system of the country needs to be improved. This undeniably requires intervention from the state.

Implicit Role Of The State

To give a contrast, India’s logistical cost from the budget is 14 percent whereas the sector contributes only 14.4 percent to the country’s income. For other developing countries, the logistical cost is about 10 percent. This entails that there is also a strong need for top-down measures to get things in order for the sector. 

This is where PM Gati Shakti comes into the picture which is one of the most talked-about topics for the logistics sector since the plan was laid down at the recent Budget 2022. The 25-year long plan is targeted to make the movement of people, goods, and services more efficient across India which will be powered by the digital platform. 

Prahlad Tanwar, Partner and Global Head - Logistics Services, KPMG in India said, “Traditionally you have one ministry focused on building Powerplants and another ministry focused on railways and transportation, there has there been very little coordination. The Gati Sakti can go a long way in integrating the same.”

 

The problem of reverse logistics (return of products from consumer to supplier) has always been a challenge for e-tailers. However, the challenge has magnified in the current age of Q-commerce where consumers want everything at their fingertips within minutes if not hours. It is even a greater hassle for the e-grocery players since their supplies have a short shelf-life. They are heavily dependent upon a reliable reverse logistics model to be sustainable over a longer period. 

What Comprises Reverse Logistics?

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