How to reduce RTO in eCommerce?

How to reduce RTO in eCommerce?

The natural outcome of a booming eCommerce industry is the emergence of challenges. And the Return to Origin (RTO) menace is one of the most underrated issues plaguing the industry. More so, its cascading impact ultimately hits the retailer’s bottom line.

Now that you know its gravity and magnitude, processes are underway to tackle and minimize its occurrence using multidimensional strategies. Zaakpay is at the forefront of evolving tactical solutions to insulate online stores from the RTO hazard. But, first, let us understand what RTO means.

Understanding RTO

RTO is an acronym for Return to Origin, which essentially describes a sold item not delivered to the buyer and transmitted back to the shipping warehouse. Notwithstanding a customer-centric robust return policy, an RTO nevertheless inflicts multiple losses. Howsoever meticulous the checkout using an Ecommerce payment gateway, a purchase often lands into the RTO category. Especially for eCommerce, orders are served in smaller Indian towns. So, what are its implications?

Financial Impact of RTO in eCommerce

There are several aspects of the RTO that need attention to mitigate losses. While Zaakpay integrates merchant services without setup and maintenance costs, unchecked RTOs can eat into the online store’s finances. Moreover, it negates the low transaction discount rates inherent to the service provider’s payment gateway charges. So, let us take a closer look at how the business suffers a financial loss.

Forward and reverse logistics expenses
Inventory items blocked while in transit
Return item’s physical quality evaluation
Increased shipping cost for handling delicate and fragile items
Cash handling expenses for COD purchases
Order processing expenses for operations and resources

Several studies have revealed that one out of every three orders is converted into RTO, significantly from fraudulent intent or COD orders. In addition, many canceled and return orders do not sell, adding to further losses. And these are also classified under the RTO category. So, that brings us to the question of why eCommerce must reduce RTO.

Reasons to Reduce RTO

The primary reason to reduce RTO is to protect the eCommerce store. Moreover, fraud and COD failure-related RTOs often lead to inventory and revenue leakage. Therefore, eCommerce establishments must devise plans to counter RTO before it drains out your resources and affects your business efficiency.

On the other hand, if the RTO arose due to delayed or inaccurate delivery, it is time you optimized your shipping experience. In addition, it also reflects upon the online store’s fulfillment process.

Read Also: What Customers Expect from the eCommerce Checkout Experience

Ways to Reduce eCommerce RTO

There are no two opinions about reducing RTO to protect the eCommerce store’s revenue and the brand. Thus, the following are essential for all eCommerce businesses.:

Put a check on the overall return rate to eliminate RTO.
Encourage customers to pay digitally during checkout rather than COD to mitigate financial loss.
Activate the verification process to ascertain the buyer’s availability to accept delivery.
Rely on a distributed warehouse network to efficiently handle RTO and ensure a quick TAT (Turn-Around-Time).

Having understood the entire gamut of eCommerce RTO issues, it is now time to look at the strategies to combat it.

1.Curb RTO:

The best way to reduce RTO is prevention, and the following can help achieve it:

Improve the product page visually and in description content. In addition, provide a dynamic size chart to ensure the customer understands the chosen item with clarity.
Ensure that the correct item reaches the buyer by focusing on order accuracy.
Product page reviews are a sure indicator of its quality and usage.
Install a robust customer support mechanism using a chatbot, email, and dedicated phone number to resolve emerging issues.


2.Order Tracking:

Timely delivery of purchased items and a real-time order tracking facility is the right tool to monitor its movement and raise customer confidence. In addition, meeting delivery commitments minimizes customer dissatisfaction, especially orders for special events.

Include a choice for lightning-fast shipping and delivery.
Communicate the delivery timeline with updates to instill trust in the customer.
Promptly notify transit delays.


3.Multiple Payment Methods:

Today’s customers are comfortable in handing digital payments using their preferred modes. Therefore, it is prudent to offer a wide choice of payment methods to ensure transaction success and eliminate COD, one of the primary causes for RTO. For instance, the Zaakpay eCommerce payment gateway handles 100+ payment methods.

Payment methods must include all cards, wallets, UPI, QR Code, Pay Later, Net Banking, and more, emerging with technology advancements.
Throw in offers, discounts, and rewards for using digital payments.


4.Convert Returns into Exchange:

Apart from disrupting the product lifecycle and shopping experience, RTO adversely impacts the online store’s financial credentials. Therefore, to restore customer confidence, the following are essential:

Encourage replacements and exchange offers for the returned item to counter a negative outcome.
Offer the refund in the store wallet to ensure a future sale with a captive resource within the store.
Immediately refunding the wallet is better than waiting for days for the source account or card refund credit.


5.Check Customer Availability:

Failed deliveries are the precursors to RTO, apart from adding to the costs for rescheduling. Instead, consider the following:

Connect with the customer automatically to ensure that the scheduled delivery is successful.
Leverage the potential for order confirmation through various tools and offer the customer a facility to modify delivery information.
Simplify the return, cancellation, and refund mechanism to eliminate the possibility of RTO.


6.Distribute Inventory Network:

A distributed inventory across India saves shipping costs and delivery timelines, apart from the following benefits:

It speeds up the TAT for RTO when it occurs.
The item is up for resale immediately after it is returned or canceled.
Leverage the potential of fulfillment centers.


7.Prevent Return Frauds:

One of the ways to reduce RTO is to set up a mechanism to combat return frauds and protect the eCommerce outlet from revenue losses. Here is what you need:

Install fraud protection software to track and red-flag inconsistent behavior.
OTP verification at the delivery end
Screen fraudulent customers constantly and block them.
Raise a claim on the marketplace when the returned item fails a quality check.

RTO is a reality with which the eCommerce industry has to cope. However, it is possible to reduce it substantially through an efficient return management mechanism. In addition, tapping Zaakpay’s tailored merchant services can mitigate RTO’s impact on the online store’s finances and prevent disruption in the cash flow on nominal payment gateway charges. Finally, reduced RTO boosts your efficiency and brand equity.


IITSWEB is the Chief Business Development Officer at IITSWEB, a Magento design and development company headquartered in Redwood City, California. He is a Member of the Magento Association and an Adobe Sales Accredited Magento Commerce professional. Jan is responsible for developing and leading the sales and digital marketing strategies of the company. He is passionate about ecommerce and Magento in particular — throughout the years his articles have been featured on Retail Dive, Hacker Noon, Chief Marketer, Mobile Marketer, TMCnet, and many others.

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