Reverse logistics

What it means

Reverse logistics covers all flows of goods, packaging and materials from the customer back to the seller, manufacturer or recycler. It includes returns after withdrawal from a contract, complaints, returnable packaging and pallets, product recalls, refurbishment, sale of seconds and end-of-life recycling or disposal.

Unlike forward logistics, where goods move in planned volumes, reverse flows are unpredictable. Every returned parcel has to be received, inspected and sorted, and a decision made whether to restock, repair, sell at a discount, return to the supplier or dispose of it. Each step costs labour, transport and space.

Reverse logistics grows in importance with online sales. Consumers buying at a distance can generally withdraw within 14 days without giving a reason, and in some segments, such as fashion, a large share of orders comes back. Reverse logistics is also linked to circular economy goals and producers' obligations for packaging or electronic waste.

How it works in practice

For an online store, a clear and fast returns process is key: a form, a return label, rules on who pays shipping, and a refund deadline. With external fulfilment, reverse logistics is often contracted to the warehouse operator, who receives and sorts returns.

In the accounts a return is handled with a credit note, a corrective invoice that reduces revenue and, for VAT payers, also corrects VAT. Goods go back into stock at the value they still have; damaged items are written off or revalued. Shipping and handling costs for returns are best tracked separately to see what they really cost.

Analysing return reasons yields valuable information. If customers return goods because of wrong sizing, poor photos or inaccurate descriptions, improving the website information pays off. Reducing the return rate saves shipping, labour and damaged stock, which feeds straight into margin.

What to watch out for

A common mistake is not building return costs into pricing. A store looks profitable on revenue, but after return shipping, labour and unsaleable goods the margin can be much lower. Planning should assume a realistic return rate for the segment.

Watch deadlines and VAT. The trader must refund the consumer within the statutory period, and if the credit note is not issued in time or correctly, VAT on the original sale remains declared. Obligations for goods returned from abroad also need attention, as customs formalities may arise.