How Advanced Barcode Reading Technology Changes the Returns Game for E-Commerce

With online returns representing a sizable part of online sales, e-commerce providers feel the impact, both operationally and financially, and need an efficient reverse logistics process to manage those returns.

Barcodes play a key role in this process by providing a way to track the receipt of inbound packages and reconcile the inventory status of each SKU in the package. With returns growing, barcode scanning systems need to meet increasing throughput requirements. A reliable barcode scanning process shortens return processing time, improving operational efficiency, reducing costs, and increasing customer satisfaction.

The role of reverse logistics

From an e-commerce perspective, reverse logistics (or returns management) starts when the customer ships the return to a central warehouse for processing. The goals of reverse logistics operations are to provide the customer with an efficient way to return unwanted products and to help the retailer recover some value by re-selling or repairing the product if possible.

Why have returns grown?

The overall trend in returns is clear:

• By 2025, e-commerce sales are projected to account for 24.5% of all global retail sales.
• Most ecommerce businesses should expect return rates between 15-30%, with U.S. and European markets typically on the higher end of that range. 

There are several reasons why online returns have continued to grow.

• Inability to physically evaluate the product: Online customers can’t experience a product before purchase. The average return rate for e-commerce sales is 18.1%, notably higher than the 8% to 10% return rate of products bought in brick-and-mortar stores.
• Growth of e-commerce: With more people shopping online, purchases and returns have naturally increased.
• Ease of return policies: Many online retailers offer generous return policies to encourage purchases, leading to more returns.
• Buying behavior: Customers often buy multiple sizes or variations with the intent to return what doesn’t fit or suit their needs, a practice known as “bracketing.”
• Product expectations: Discrepancies between how products are presented online, and their actual appearance or quality can lead to dissatisfaction and returns.

Increasing returns impacts the bottom line

Online retailers feel the impact of this ever-increasing number of returns for several key reasons:

• Inefficient scaling of manual processes— As companies grow, manual return processes don’t scale efficiently, especially when the labor market is tight. These types of jobs often have high turnover which also increases costs and reduces efficiency.
• Revenue loss—When items are returned and refunded, the seller incurs a revenue loss. This top-line impact is significant, with returns often hitting 15 percent of sales or higher. The average refund rate for e-commerce is even higher, around 20%, which creates a significant potential for revenue loss unless the retailer can recoup revenue by reselling the returned product.
• Increased labor costs— The traditional way for companies to solve throughput problems is to add more labor. This can be expensive (the average warehouse worker is paid $15/hour) due to a tight labor market, the added costs of turnover and retraining, and the overall costs of processing a negative-value transaction.
• Loss of customer lifetime value—Customers will go elsewhere if they don’t get an easy, friction-free return process. Consumers who have a pleasant experience buying and returning goods are likelier to continue shopping with that online vendor.

Improved labor productivity translates to happier customers

Returns are a fact of life for e-commerce platform providers. Consumers expect the opportunity to return something they bought, and they want the experience to be fast and as frictionless as possible. Bad experiences usually translate to lost customers.

Since returns from online purchases are expected to keep growing, e-commerce companies must find ways to streamline their reverse logistics to satisfy their customers without wasting money. They need operational processes that are efficient and built to scale with the expected growth.

Labor is a significant part of the process and e-commerce companies should be evaluating ways to either reduce labor through automation or increase the productivity of workers who handle the returns. Automation reduces labor costs, minimizes losses, and helps decrease the time it takes to process each return, which keeps customers happy. One way e-retailers can achieve these goals is by using barcode technology to track the flow of returned goods from the consumer through the disposition process.

The role of barcodes in the returns process

Barcodes play a key role in retail logistics operations. Barcodes on package labels contain relevant shipping information for efficient sorting when staging outbound shipments for transport carriers. 1D  barcodes (such as UPC or EAN) or 2D barcodes (such as DataMatrix or QR codes) placed on each SKU help identify products for inventory and order management.

Leveraging these barcodes during the reverse logistics process increases process efficiency. When handling incoming returns, operators scan codes on the returned items to decide if they can be returned to inventory, fixed, or thrown away.

Challenges of barcode scanning

In many circumstances, barcode scanning is a manual process performed by an operator, who can meet throughput requirements up to a certain level but may struggle to keep up as the volume of returns increases or if barcodes are occasionally unreadable due to wear and tear.

Human operators are also prone to fatigue when performing repetitive operations for hours. Fatigue brings mistakes, which cost money and time. During the shipping and return process, barcodes can get damaged, torn, or smudged, during their journey back to the processing facility, making them unreadable to older scanner technologies like laser-based scanners.

Increase efficiency and lower return costs with image-based barcode readers

Using image-based barcode readers to process incoming returns can bring multiple benefits for both high and low-volume facilities.

High-volume centralized return facilities

Using modular vision tunnels designed to process high volumes of incoming returns via conveyor-based systems, return shipping labels can be quickly decoded and packages routed to the proper processing area. These tunnels use image-based barcode readers on multiple sides of packages to ensure extremely high read rates, so a minimal number of packages require manual intervention.

Lower volume operations

Smaller incoming operations or downstream processing stations can use hands-free barcode reading configurations enabling operators to quickly and reliably scan each item as they decide whether it can be returned to inventory, repaired, or disposed of.

What makes image-based barcode scanners ideal for reverse logistics?

Automating the returns process with image-based barcode reading can significantly enhance efficiency in many ways:

• Faster processing: Image-based barcode readers have high success rates reading damaged barcodes and do so quickly and reliably, reducing the time needed for manual data entry and verification.
• Accuracy: Automated barcode scanning minimizes human errors that can occur with manual processes.
• Cost reduction: Automation can lower labor costs and decrease the need for added resources to manage returns by speeding up the returns process and reducing errors.
• Improved stock management: Automation instantly updates inventory levels, enabling more precise stock control and lowering the risk of having too much or too little stock.
• Improved customer experience: A streamlined returns process leads to quicker refunds and exchanges, enhancing customer satisfaction and potentially increasing customer loyalty.
• Scalability: As the volume of returns grows, an automated system can easily scale to manage the increased load without a proportional increase in labor or processing time.

The bottom line

Returns are unavoidable for both online and brick-and-mortar retailers. As a percentage of sales, they’ve increased over the last several years and can negatively affect a retailer’s bottom line. Automating parts of the returns management process with image-based barcode readers can increase efficiency and productivity, lower costs per return, and improve customer satisfaction.