How To Reduce RTO in E-Commerce

Reducing RTO in e-commerce stores has been one of the most underrated and unspoken problems in the industry. The problem has been bogging sellers down for many years now, yet nobody understood the gravity of it. 

As e-commerce is beginning to make large strides across all parts of the country, sellers are receiving a high influx of orders. As internet penetration deepens and makes its way into the inroads of India, we can expect the number of sellers and buyers to exponentially increase.

As sellers are faced with a mountain of opportunities and orders every day, they are also plagued with a common problem– Return to Origin or RTO orders. In this article, we will be looking at what is RTO, why they occur, and what are the best practices to reduce RTO losses for your e-commerce store.

What is Return to Origin?

Return to Origin is defined as the process in which an order never reaches the customer and is sent back to the warehouse citing a variety of reasons. RTO orders can become more significant as sellers receive more orders and expand to Tier 2 and Tier 3 cities.

Studies show that 1 in 3 orders are RTO orders. This can result in a significant increase in handling costs to process these orders. Let’s look at how e-commerce businesses can lose money:

• Forward and reverse logistics costs
• Blocked Inventory (Items stuck in transit)
• Physical quality check and re-packaging of returned items
• Increased probability of damage to fragile items, and hence more money spent in shipping them
• Cash handling charges for CoD orders
• Operations and resources cost in order processing

It is also worth noting that most RTO orders for e-commerce stores arise out of fraudulent instances and Cash on Delivery orders.

The impact of e-commerce fraud

Fraud in e-commerce has substantially increased globally over the last few years with the immense rise in online marketplaces. With more sophisticated technology available to fraudsters, it’s only become more difficult for e-commerce businesses to keep a track of the tactics used to defraud online businesses.

Here are some common types of fraud performed in the e-commerce industry:

1. Chargeback fraud
2. Identity theft
3. Return fraud
4. Credit card fraud
5. Merchant fraud
6. Phishing
7. Clean fraud

The real impact of e-commerce fraud is the cost incurred to the business. Every failed or retracted order causes a chargeback to the e-commerce business. A chargeback is a sum that must be returned by the merchant to the cardholder after a fraudulent transaction. 

However, successfully executing a chargeback can be expensive. Processing a chargeback includes operational costs such as transaction fees, legal fees, currency conversions, etc. This can mean potentially large losses for the merchant when an elaborate fraud is in question.

Also read: Chargeback Fraud Setting Back E-commerce Businesses: Is There a Way Out?

Another type of loss is the fact that the seller will not be able to resell the same product after it is canceled and he will have to bear the losses. These types of losses are classified under Return-To-Origin or RTO. 

Also read: A short guide to e-commerce fraud

How to reduce RTO in e-commerce

One of the questions that has been plaguing e-commerce for many years is “How to reduce returns in e-commerce?” or simply, “How to stop RTO?”

The answer to this question can be simpler than you think, albeit you follow the right ways to mitigate with these returns. Let’s look at some effective ways to minimize returns on your website:

1. Optimize product descriptions: A concise product description can go a long way in helping you set the right expectations with your customer. It’s safe to say that an effective product copy can cut down your return worries by at least 50 percent!
2. Tracking: Tracking plays an important part in customer satisfaction and can significantly bring down customer anxiety whilst ordering from an unknown website. Providing your customer with timely updates can reduce chances of returns and cancellations.
3. Checkout process: Payments are a crucial part of how a customer perceives your online store. A safe payment experience is the dealbreaker when it comes to online shopping for Indians. With a trusted payment partner like Razorpay, e-commerce businesses can process payments smoothly and guarantee a hassle-free checkout experience and reduce returns on your store.
4. Packaging: One of the best ways to keep things lively even during a pandemic is to send over a great package– we mean, aesthetically and functionally. If you’re getting a lot of returns due to damaged products or unsatisfied customers, it may be a good time to review your delivery packaging. Ensure tamper-proof packaging, especially if you are dealing with fragile and perishable items. These can help you greatly in bringing down returns due to faulty packaging.
5. Customer service: Indian shoppers seem to have finally broken out of the shell where they fear to purchase from an unknown brand/seller. One of the major contributing factors for this is simply the extent to which successful e-commerce companies have bridged the gap with customer service. Customer service, just like tracking, is crucial in eliminating second thoughts and doubts about how good your online store is. Establish an airtight feedback system to deal with customer grievances to see e-commerce returns and RTO drop significantly.

How can I reduce my cash on delivery losses?

However, things are turning around for the Indian e-commerce industry and the awareness about RTO losses is increasing manifold by the day. With Razorpay Thirdwatch, business owners need not worry about coping up with losses manually, as we help you tackle Cash on Delivery losses with Artificial Intelligence and reduce RTO and cancellations in your e-commerce store.

Here’s how Thirdwatch can help your business:

Shipping address verification: Thirdwatch identifies incomplete and non-deliverable addresses. You can verify and update the address with the customer via an SMS, WhatsApp or even a direct call and increase order deliverability rates.

Risky order profiling: Thirdwatch captures orders directly from your storefront. It flags risky and fraud orders in milliseconds upon analysing 300+ parameters and provides detailed reasons. Stop potential order cancellations and RTO orders with Thirdwatch.

Dashboard analytics: Get RTO insights at a state/city/pincode level and discover cues that contribute to your RTO losses. Get detailed order review reports to understand delinquent behaviour and incorporate learnings in your business strategy.

Model customization: Thirdwatch’s ML Algorithms learn, grow with time and localise the learnings to constantly improve accuracy according to your business’s needs. You can also set your own flagging rules to make it even more flexible. What’s more, blacklist certain users based on email IDs/phone numbers etc

Intelligent automation: Automation is essential as your e-commerce business grows. Set intelligent workflows to automate accepting or rejecting red flagged orders based on the risk reasons and save on operational and support costs. Automate order confirmations, payment links and other functions to optimize your business and reduce operational costs and reduce RTO for your e-commerce store.

Convert risky CoD orders to prepaid: With the all-new PrePay CoD from Razorpay Thirdwatch, you can now convert your risky CoD orders to prepaid by sending payment links to your customers. Additionally, you can avail features like discounts, automation and also send payment links in Hindi with Razorpay Thirdwatch.

That ends our article on how to reduce returns in e-commerce and how to eliminate RTO losses in your e-commerce store. We hope this helped you in gaining better insights about how you can deal with such losses.

Curious about Thirdwatch? Check us out below and avail a one-month free trial!