Often, your logistics partner uses terms such as RTO shipment, instructed to RTO, etc. As a business owner, have you ever wondered what RTO is? The full form of RTO shipment is ‘Return To Origin’ shipment. This article will explain what RTO is, its impact on the business, reasons and solutions for the same.
What is RTO?
Return to origin (RTO) is a common term in the e-Commerce business. It refers to the shipments that do not reach customers for any reason, hence, are shipped back to the origin or sellers. Status of ‘Instructed to RTO the shipment’ means the product is returning to the seller.
RTO is one of crucial challenges for the e-Commerce industry as bearing additional cost for returns has severe impact on profit.
Impact of RTO:
RTO affects the business and operations in various ways. Here are some of the ways how it can affect your profits:
- Additional cost: It is costlier than forward logistics. When product is returned to origin the cost of forward and RTO charges both are applied to the seller.
- Possibility of damage: During logistics and reverse logistics, the product remains in transit for additional time and is handled more often, hence the chances of its damage increases. If the product is damaged in transit, it’s an additional business loss besides the logistics.
- Increased operational cost: It is increased operational cost of processing the order, running quality checks, packaging, etc. If it is returned to the seller, it is waste of operational efforts, time and money too.
- Blocked inventory: When a customer places an order and the order is processed, the inventory is blocked. While when it is returned, it takes a short while to bring it back to the inventory. The product needs to be quality checked again before bringing it back to the inventory.. Until all checks are done, it remains blocked and cannot be dispatched to other customers even if the order is placed.
Reason behind RTO and how to avoid it?
Can you avoid RTOs? Probably you cannot eliminate it entirely. However, if you understand the reasons why products are returning undelivered, the number of RTOs can be reduced.
Sometimes the address provided by the customer is incorrect. These errors are not intentional but can be a spelling error, or incomplete address, etc. For example, a pincode is missing in the address. Another common error in this regard is insufficient address. For example, Mahatma Gandhi Road, Pune. In such cases it becomes difficult for the logistics company to locate the customer.
Solution: You can validate the address at various points. If the order is placed trough e-Commerce, incomplete or wrong address cases can be eliminated through digital validation such as having character limit, mismatch of address and pincode, no mention of landmark, etc. If the order is placed through other channels, the concerned team can get in touch with the customer for address validation.
Customer not available
Sometimes, address provided is correct, however the customer is not available to receive the order or the premise is locked. When the premise is locked, usually seller gets status as RTO lock shipment. In case of eCommerce, possibility of someone else receiving the product on behalf of the customer is explored. However, it is not always feasible especially if it is cash on delivery (COD) order. If there is no one available to receive the product, it needs to be sent back to the seller.
Solution: Many times, logistics companies confirm the availability of the customer by calling beforehand and accordingly the product is sent for delivery. As a result, chances of RTO are reduced. Additionally, some e-Commerce companies also ask customers to verify if the delivery address is an office address or residential address, depending on the information provided, delivery can be scheduled. For example, if it is an office address, delivery attempts on weekends can be avoided.
Refusal of the order at doorstep:
At times, customer refuses to accept the order at the doorstep. When customer rejects the order the status of the order is changed to ‘RTO: customer rejected the order’. There could be various reasons for it such as change of mind, wrongly placed order, the product is no longer needed, duplication of order, etc.
Solution: A seller or logistics company may not know this in advance. However, once the order is placed, seller can confirm call the customer and verify the details to for eliminating chances of order bring wrongly placed. The new age technology can help you identify customers refusing orders repeatedly based on the track records. Sellers can be cautious with regards to their orders and if the situation persists, can block them.
RTO is a big challenge especially for the ecommerce industry. However, technology plays a critical role in logistics and can help resolve this challenge to some extent. For example, customer history can be tracked to see RTO repetitions, addresses can be verified, etc. Lesser the RTO, better the profit. This will further result into meeting your growth goals.