Why RTO is a crucial metric for e-commerce businesses
Published on 31 Mar 2023
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Returns are an unavoidable component in e-commerce. But RTO in shipping is a great metric to make faster and more profitable last-mile delivery. 

Most sellers have been through the process of shipment returns, some more than others. Customers choosing to return goods they opted for is inevitable in any business. But in eCommerce, due to a lack of personal interaction and preference for Cash On Delivery (COD), a customer may not feel obligated to complete the transaction. Then there are times when logistical hiccups such as incorrect contact details can result in Return to Origin (RTO).

RTO in shipping is, therefore, a critical metric for eCommerce. Online businesses will ignore it at the peril of unforeseen losses and erosion of bottom lines. Before we get down to the part where we understand why RTO is such an important metric in eCommerce, let us first find out why shipment returns get logged with a seller.

5 top reasons why returns take place

Customers can return goods for several reasons. There are times when logistical issues result in the non-delivery of a shipment. Here are the top 5 reasons for Return to Origin in online business.  

Damaged/inaccurate product: Customers return goods when they are damaged or do not meet product specifications.
Delayed shipment: Customers refuse to accept the shipment because it has been delayed or they have changed their mind about it. 
Customer is unavailable: Courier partner logs recipient as unavailable despite multiple delivery attempts. 
Incorrect/incomplete customer details: A delivery partner cannot hand over the shipment if the address/contact number is incorrect. 
Higher return risk with COD: The cash on Delivery option results in a higher rate of RTO in shipping as the customer does not have any obligation to fulfil the contract. 

Why RTO is an indispensable metric for online businesses 

Now that we know the main reasons for shipments getting returned, here is a quick guide to why calculating the Return to Origin rate is so important in eCommerce.  Assists in accurate pricing of products.

As an online seller or reseller, your profit margins do not just depend on the cost of production or procurement. While average order value and revenue per purchase are important metrics for pricing, without RTO in shipping the margins are not accurate. RTO-inclusive pricing may bring down the profits in the short run, but will turn out to be a wise decision when shipment returns start getting logged. Those without RTO price points will see their bottom line scraped and it will hurt.

Accurate assessment of shipping charges with reverse logistics 
Shipping charges must include reverse logistics. This makes transportation and warehousing assessment more accurate for a seller. With RTO in shipping as high as 30 per cent in eCommerce relying only on forward logistics will give an incomplete picture.

Tackles the issue of NDR 

Non-Delivery Report is directly proportional to Return to Origin cases. When a good gets returned, an NDR is generated. A higher NDR can bleed a business dry. By studying RTO in shipping, the logistics department can increase customer satisfaction and reduce NDR.  

Takes into account add-on costs for returns 

RTO in shipping is not a stand-alone cost of returns. The cost gets compounded by repackaging of shipment returned, damage to goods in transit, expiration cost, and the expenses incurred on resource mobilisation for re-processing the returned goods.

Helps identify habitually risky resellers and customers 
Any experience, even if bad, comes with a lesson. RTO brings invaluable feedback about customers, sellers, and even risky drop points. It allows sellers to prioritise genuine customers with a good track. Because of RTO, AI can flag sellers who are habitually risky.  

Helps automated processing of data for improved last-mile delivery 
Automation is an intrinsic component of inventorying. RTO logs assist greatly in data mining to help make informed choices in shipping, delivery and selection of courier partners. A collective improvement in these processes results in faster and more reliable last-mile deliveries.  

Helps you determine the true ROI 
Return on Investment (ROI) is dependent on several factors including product quality and customer satisfaction. But Intelligent pricing offers a competitive advantage in eCommerce. When RTO is included in pricing, conversion rates go up with markers separating good and risky customers and sellers. This results in a better ROI.  

Key takeaways 

RTO-inclusive pricing is indispensable for reducing losses arising out of returns and buffering the ROI for sustainable business. 
RTO in shipping improves logistics for better transportation and warehousing assessments. Reverse logistics cover shipping costs for Return to Origin.  
Return to Origin rate helps automated risk assessment and helps in faster and more reliable last-mile delivery. 
Return to Origin can erode your bottom line. Ecom Express can be your trusted one-stop solution for reliable logistics and last-mile delivery in e-commerce. Our technology-aided logistics support helps reduce RTO in shipping and improves your ROI. We will be happy to answer your queries at 08826398220. You can also write to us at 

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