Reverse Logistics: The $415b Industry You Had No Idea Existed

When you order something online, it is a bit of an unspoken rule that you as an online shopper should have the right to return it. Customers today demand a return policy from their online marketplaces.

The complex process of dealing with products after they have arrived at their “final destination” is called reverse logistics. It might not be an obvious choice as whopping global powerhouse, but this is a market that Allied Market Research values at more than $400 billion a year. Amazon, in fact, reports that this process of reverse logistics is the most difficult problem they grapple with. The entire field was born around 1995.

The growing field is always hungry for partnerships, human capital, and technological innovation. If your business features a return button on your customer’s purchases page, you should take note of this awesome colossus you had no idea existed.

Case Study: Amazon

About $14b of products each year is returned through Amazon. This is a major headache for the logistics department. As in most businesses, human capital takes the bulk of this expense, particularly if a courier is needed to transport the returned product from the delivery address back to a logistics hub. 

One creative way Amazon has been able to circumvent the need for this practice has been a tactical partnership with Kohl’s. Essentially, you can return your Amazon purchases at any Kohl’s location.

Amazon has taken dramatic steps to combat the problem of reverse logistics. For example, robots and humans work together at many Amazon plants today. They are called Xanthus bots and they are part of Amazon’s plan to partner with (or buy) tech assets that streamline their supply chain process. These mobile little robots operate using QR codes and conveyer belts on their back. 

Reverse logistics companies like the German Return Logistics Group market themselves as solving a customer need while leveraging additional revenue. Amazon partners with third parties like this one to streamline their operations

Another such company is Liquidation.com. It ships more than $600m worth of returned Amazon products every year. You can find these products for down to 5% of their original price! Reverse logistics is a prerequisite for almost any online business, but there are some industries where modern logistics technology has really levelled the playing field.

Case Study: Furniture

Online shopping has made a lot of time-consuming operations obsolete. A lot of obvious examples come to mind like buying CDs and waiting for taxis, but there is a trove of unexpected impact that tech has had in the unlikely world of office furniture. That’s right, the simple elements of an everyday office have not escaped the flood of change that we are living through.

In this case, the change has been for the better in many ways. “Hassle” was the word most often used by the employers of yesterday to describe setting up an office.

Hassle-free delivery policies have been one of the most important impacts that modern technology has had on modern office furniture. In the 20th century, entrepreneurs and start-ups often had to spend money out-of-pocket to hire a moving company to bring furniture like seats, tables, and computers from the brick and mortar where they were bought into the office. You can imagine what an expensive inconvenience it was for small business owners back then to transport furniture for office staff in those days. Often, entrepreneurs would rely on a friend with a truck.

Today, not only can you avoid having to make a return with virtual fitting, for example, you can often return or sell what doesn’t work for you. 

Facebook sales groups are a diminutive, but effective form of reverse logistics. Milions of people each year use exchange subgroups on community-driven sites like Reddit, Craigslist, and Letgo to offload furniture that the original seller will not accept for some reason. Yes, even large, heavy that you sincerely have no idea why you bought. 

Adam Hansen