IndustryARC updated the market research study on “Reverse Logistics Market”- Forecast (2024 - 2030)

The global Reverse Logistics Market size was estimated at USD 731.30 billion in 2022 and is projected to grow at a compound annual growth rate (CAGR) of 9.4% from 2023 to 2030. The global expansion of e-commerce businesses and the increasing frequency of returns and replacements of products have propelled the demand for reverse logistics services. Increasing product recalls due to strict government rules and product quality standards is expected to boost market growth. A competent reverse logistics solution has become essential owing to the expansion of e-commerce businesses worldwide. The demand for returning goods in a simpler way is increasing as the e-commerce industry/business is significantly expanding.

The e-commerce service providers emphasize reverse logistics as certain customers prefer to initially analyze the ordered products physically and then decide whether to keep them. If the product is not worth buying, customers can return it with the help of reverse logistics. For instance, buyers can only test clothing after making a purchase decision, especially for online shopping.

The frequency of returns and replacement items, necessitating a reverse logistics service, has propelled owing to the expansion of e-commerce businesses worldwide. Returns are more prevalent when customers shop online, as adding products into a virtual shopping cart is simple, but the appearance or fit of the product can be only verified physically. According to National Retail Federation, in 2021 online sales were approximately 23% of the total USD 4.583 trillion retail sales in the U.S. In addition, unwanted purchases and return to retailers' storefronts and warehouses are causing businesses a headache, bearing the loss.

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The increasing use of advanced technologies such as Automation, Robotics, and Augmented Reality (A.R.A.R.) has enabled e-commerce companies to excel in efficiency and reachability. An increasing number of consumers prefer online purchasing over in-store purchasing owing to benefits such as convenience, lead time, cost, and variety of choices. E-commerce businesses significantly depend on shipping and warehousing capabilities to transfer products from retailers or manufacturing units to end-users in a shorter lead time.

Automation can route customer return requests, create packaging and labeling materials, reduce wait times for returning items to physical stores, and offer customers the option to return orders by mail, among others. Companies can use robotic process automation to contact consumers once the return request is initiated or to complete the return process and audit all operations efficiently. Automation can provide transparency in the return process to ensure that customers remain updated on the process once they raise a request for a return, exchange, or submit a warranty claim. Moreover, it helps in preventing fraud in the returns process.

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COVID-19 Impact

The outbreak of the COVID-19 pandemic negatively affected supply chain operations globally. The pandemic resulted in an unprecedented strain on logistics and transportation services. Shipment companies encountered uncertainty in the movement of goods owing to the lockdowns imposed in countries such as the U.S., India, and the UK. The logistics networks were eventually disrupted due to a supply-demand imbalance and a reduced delivery capacity. The logistics activities in many nations were further hampered by a limited workforce and reduced operational hours.

However, the COVID-19 pandemic had a positive impact on the growth of e-commerce platforms. With physical stores closed, e-commerce sales increased during lockdowns. For instance, according to Digital Commerce 360, the pandemic resulted in e-commerce sales of USD 219 billion in the U.S. in 2020-2021. The increase in online sales led to an increase in product returns by consumers worldwide. Furthermore, the pandemic caused delays in returns and refunds due to the limited movement of goods and restrictions imposed by the state and international governments. In addition, return policies were increasingly being used by businesses to differentiate themselves from their competitors.

The high retail cost has paved the way for new trends such as “Buy Now, Pay Later.” Retailers have also begun advertising “Try Before You Buy” to increase sales and brand loyalty. Intelligent reverse logistics systems have become essential for businesses and their customers. The pandemic has compelled delivery companies to balance efficiency, safety, and customer satisfaction. Consumers are anticipated to prefer online purchases more than physical outlets, even after the pandemic owing to safety and security concerns. Therefore, retailers and manufacturers must prioritize reverse logistics to optimize the return process.

A high number of recalls of vaccines were recorded during the COVID-19 pandemic. For instance, 1.63 million Moderna vaccines were recalled in Japan by Takeda, a pharma company based out in Japan, due to contamination. Furthermore, adopting artificial intelligence in the reverse logistics process, helps providers automate the recall and return process, thereby generating savings in the whole supply chain process. Predictive analytics tools such as machine learning are adopted in multiple stages for managing the supply chain. Based on historical return data, these tools help assess the patterns for reverse logistics requirements, thereby managing the resources cost-effectively.

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End-user Industry Insights

In terms of the end-user industry, the market is classified into retail & e-commerce, automotive, consumer electronics, healthcare, and others. The retail & e-commerce segment dominated the overall market in 2022 attaining a revenue share of 49.91%. It is anticipated to witness a CAGR of 10.2% during the forecast period. The retail and e-commerce end-user industry segment has experienced significant growth within reverse logistics. This segment specifically focuses on managing product returns within the retail and e-commerce sectors.

Several factors have contributed to the expansion of this segment. E-commerce has transformed the retail landscape and significantly impacted reverse logistics. With the increasing popularity of online shopping, customers have the convenience of purchasing products remotely. However, this has also led to a higher volume of product returns. As a result, retailers and e-commerce companies require robust reverse logistics processes to handle the influx of returned items effectively. This has led to the growth of dedicated reverse logistics operations in retail and e-commerce.

The automotive segment is anticipated to observe significant growth at a CAGR of 9.9% throughout the forecast period. Many stakeholders are impacted by automotive recalls, including car owners, automakers, component manufacturers, franchised dealers, insurers, and government authorities. However, reverse logistics is essential in the automobile sector for several reasons, including legal policies surrounding ecological and environmental issues.

In addition, the vehicle manufacturer is responsible for maintaining the product after its useful life has expired due to the composition of ecologically sensitive components in automobiles. Some factors responsible for automotive recalls include emission recalls, electric vehicle battery defects, and electronic component defects. The significance of reverse logistics in the automotive sector increases due to all these factors and the growing awareness of consumers regarding the environment. The automotive segment is further segmented into spare parts, lubricants, and vehicle accessories.