How Non-Delivery Report(NDR), RTO impact seller's profitability?

RTO is one of the most important concepts to note when it comes to maximizing your profitability.
How non-Delivery Report (NDR), RTO, and their impact on the seller’s profitability?

If you’re an online seller, you might be aware of the perils of non-delivery of shipments. The reason behind incomplete delivery could be anything from an uncontactable customer,incomplete or incorrect address to unavailable COD amount with the customer or even a customer refusing or postponing the delivery. You, however, were liable to pay your courier partner and would’ve paid it out of your pocket. Such instances are called ‘non-delivery’. But can such instances be avoided? If yes, how? Let us find out.

What is NDR?

NDR stands for Non-Delivery Report, which is an industry-wide term used for delivery attempt failure generated by the courier partner. If a seller doesn’t take action on a non-delivery report, it reduces the chance for further success and in turn, increases the percentage of Return to Origin (RTO)

How can one process an NDR?

When an NDR is raised, you have two alternatives available. You can either opt to reattempt delivery or choose RTO for the package. Delivery can be reattempted by furnishing the required details such as correct address and contact number, etc. You must note that courier partners make 3 attempts at most and will subsequently mark the package as RTO or ‘Return to Origin’.

Today, forward-looking logistics aggregators have introduced NDR or Non Delivery Report feature to minimize non-deliveries wherein they include E-tailers in this last-mile delivery process in order to enable better and proactive communication between the buyer and the courier partner. Sellers can update incorrect address or contact details. This feature also empowersa buyer to opt for a different delivery date as per their preferencesor availability. With more transparency and better communication, you get to reduce your NDR and RTO orders just in time and thus, avoid huge losses in the process. A few players have taken such initiatives a step further with programs such as ‘NDR Buyer Flow’ which is essentially, an IVR calling facility, wherein customers can reach out if they are not contactable or have refused delivery. These features help validate the claims of courier partners as well.

Is RTO a genuine problem for eCommerce businesses?

COD, as it has emerged in the Indian market, is a perfect hack where either the trust for online sellers hasn’t been built or the digital payment adoption is yet to occur. It is a magic wand that has beenfuelling the growth of e-commerce majorly in tier 2 and Tier 3 cities.

But it has a bane of its own. RTOs mostly happen in the case of ‘Cash on Delivery’ orders. As a result, a whopping 40% orders are returned industry-wide, which means that 1 out of 3 COD orders are returned overall.This causes monetary losses in terms of operational costs of logistics as well as locked-in capital.In a study conducted by Deloitte ‘Future of Ecommerce - Uncovering Innovation’, it was found that at times conventional logistics partners do not have the required expertise to handle COD, recheck return parcels, and other complexities related to the digital sale. It, ultimately, is making e-tailers to either establish their own delivery network or engage with multiple shipping partners for supply chain management, especially the last-mile delivery.

This is an area where modern logistics aggregator – with their tech-driven infrastructure – make a sizeable difference. They leverage ultramodern technologies including Artificial Intelligence and Big Data to extend the best alternative to e-tailers based on their delivery requirements.

How do the concepts of NDR and RTO impact yourprofitability?

They affect your profitability in the following ways:

NDR:

It helps you track your shipment on a round-the-clock basis. Any activity related to your shipment can be examined by you at the touch of a button, either on your phone or your computer screen.

Let’s say that your shipment failed to deliver for some reason. The tech-driven solution will alert you about the non-delivery and give you 12 hours to ask for a re-attempt or update correct information. You and your end-customer will receive 3 chances before the package is marked as RTO. Attempts are made irrespective of whether a seller participates in this process or not but added information from seller helps expedite this process. 

RTO:

In case of an RTO, any returned item is delivered back to the warehouse and stored until it is examined by the quality department or scrapped. This process could take hours, days, or even months. Just sitting on a product that should have been delivered to the customer in the first place is not a profitable scenario. 

Another big issue is that of inventory. No seller wants to lock in their inventory.It eventually leads to cash-flow-related problems. The seller would have to bear the freight charges for both sides as well (forward and return). This is when no profit is realized on the transaction.Other than that, this scenario needlessly consumes warehouse space and hampers customer satisfaction/retention.

Therefore, it is imperative to keep both the buyer and the seller informed. It gives a favourable situation for both of the transacting parties. On one hand, the seller gets to file for a re-attempt just at the right time in case of NDR. On the other hand, the buyer gets to know the exact date and time when the courier executive is arriving. Ultimately, it greatly decreases the chances of non-delivery and returns. 

RTO is one of the most important concepts to note when it comes to maximizing your profitability. An undelivered package – irrespective of the reason behind it –is never a pretty sight for the buyer and therefore, dampens your customer satisfaction.On top of that, if your company has a poor returns process, whereby there are hurdles in returning the item such as paying for shipping, or restrictive freight carriers, delays in issuing a refund, etc., you as a seller could lose the customer’s business in the future.

However, with an efficient and tech-driven logistics aggregator, you will be having multiple courier partners at your disposal. All of these aggregators are also rated according to their delivery performances in the past which, in turn, gives you greater clarity vis-à-vis the package delivery. You have greater flexibility and transparency in this scenario as compared to sticking to a single one. It will also provide you quick grievance resolution and round-the-clock support. In a nutshell, helping you become more profitable without creating additional financial burden on you.

The article has been penned down by Saahil Goel, CEO & Co-founder of Shiprocket.

 

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