Sameer Khetarpal, PGP Founding Class, Director - Category Management at Amazon in conversation with Rishi Raj Singh, PGP Co 2011

or a monolithic organisation like Amazon, reverse logistics is a crucial means of gathering customer-facing feedback, an invaluable source of information on billions of listed products. Reverse logistics is integral to the company’s business model because brand equity is the priority of Amazon’s retail business and its survival depends on customer lifetime value. Rishi Raj Singh interviewed Sameer Khetarpal to gain insights on how reverse logistics impacts the market place and how sellers need to operationalise it.

Sameer is a former McKinsey Partner who currently serves Amazon as Director - Category Management. Sameer has had key stints at HUL and Genpact and is a classic business problem solver and doer.

Rishi Raj Singh is an alumnus from PGP Co 2011. Rishi is the Founder of  www.kitchensfood.com and www.usedyetnew.com. Rishi was a commander in Indian Navy & an aviator for 15 years prior to ISB.








 
About Buyer's Fraud and OEM Certificates
Rishi: As sellers, e-commerce portals are aware of buyer’s fraud, which is why both Flipkart and Amazon are now nudging their buyers to get OEM certificates. If the product does not match what the buyer has bought, only then is a return accepted. Under the prevailing scenario, how come a significant part of sales is still coming into the reverse channel?

Sameer: Great question. If I remove all the noise and the pain to an extent, at the heart of reverse logistics is customer centricity and customer obsession. You will not be a customer centric company not giving customers the right to change their minds, to return something if they don’t like it, and of course, if there is something that doesn’t fit their specifications, there has to be a no-questions-asked return policy. As a result, companies must do what is right for our customers, and that to me is the fundamental thesis.  
                   
Having said that, in terms of what is coming into reverse logistics, the number varies. What I know is that for any industry, we vary from 5% to 30%. Some categories like apparel and shoes should have a high return and reverse logistics component because fits, size, colours, etc. can vary and customers can change their minds. 
Trust based delivery system

Rishi: In the US, when packages are shipped on Amazon, they are left at your door and considered delivered because there is a trust system in place. Do you think we have blindly copied a system that is running in a very different geography and may not necessarily be appropriate for a region where people are not used to generous returns and might misuse it?

Sameer: I actually don’t think so. There is a reason why e-commerce growth is what it is, and because customers for the first time experiencing what a world-class experience is in terms of the widest selection, everyday low pricing and the convenience of shopping online and returning products, I think this is unparalleled. 
                  
There is a reason why the industry will not continue to attract more customers. Yes, there may be fraud and abuse, but that should not take away from serving our honest customers with the best world-class service. In terms of how to prevent fraud, I think that is where technology needs to play a role and processes need to be invented for India or globally applied. A lot of work around risk assessment and fraud assessment through automated tools and analytics, especially machine learning and data analytic models, are paramount to ensure that abuse and fraud instances are minimised.

 

Ensuring Ports/ Customs deliver at world-class benchmarks

Rishi: How can we ensure that our ports/ customs deliver at world-class benchmarks? 
 
Sameer: The task can be accomplished in project mode through dedicated teams drawing experts from government and private sectors. Three steps will radically improve the system:

1. Make all export/ import services available online with minimum human contact and clear export/ import consignments in less than a day. Despite large-scale connectivity, hundreds of ports, airports, customs stations, central excise offices, inland container depots and container freight stations are still not connected and rely on standalone processing and manual documentation. We are far away from the integrated, paperless environment required for faster clearances.

We should be under no illusion; incremental approaches, limited scope single windows and quick fixes may improve ease of doing business to some extent but will not create the conditions essential for participation in GVCs.
                   
2. Allow green channel clearances based on self-declaration at the factory and port. This will ensure quicker transactions and better use of infrastructure. We may make a beginning by scanning the profile of the top 11,000 exporters that account for 85% of India’s exports. For defaulters, the penalty may be kept steep.

3.  Upgrade physical facilities at the five major ports so they meet the global best parameters in timely delivery. Also, set up three new world-class port-cum-industrial complexes. These will be the new manufacturing-cum-export hubs for technology products, free from the limitations of weak domestic infrastructure. China benefitted from this model and, as a result, products in China travel only a third of the distance that products in India do between factory and port.

Aggressive revamp of the trade infrastructure will create the necessary conditions for India’s participation in GVCs. This will spur domestic and foreign anchor firms to set up manufacturing facilities for production of not only electronic and telecom equipment but also high-end engineering and complex machinery. A large domestic market, competitive vendor base and advanced R&D capabilities will help India-based firms target higher value-added areas of operations. With multinationals’ compulsion to relocate production elsewhere as China becomes expensive, this is an opportunity India cannot miss.

Return Policy on electronic products
Rishi: The metrics on apparel are a little higher on return. But Amazon and Flipkart both have stringent return guidelines on electronics. For example, in the case of a mobile or a laptop, you can’t return it unless you get a certificate from the OEM that the product is malfunctioning. Why are e-commerce players not allowing OEMs to take responsibility for non-functional products, and hence, essentially, putting a stop to this industry?

Sameer: Firstly, I think reverse logistics as an industry has a very important role to play, and I don’t see this ending anytime soon. It is an important part of the value chain and a critical component of serving our customers. Our policy is that we believe in being absolutely customer friendly even when it is a genuine product. If the box is opened, we would like to understand why the customer wants to return the product. If there are valid reasons — if the phone is not working or if there is a missing part or if it is not a genuine product — we are happy to refund our customers or give them an exchange. That’s how our policies are structured.
                
We are working with the OEMs in parallel, of course. At the end of the day, Amazon is a market place which is facilitating transactions between customers and sellers, and if any product malfunctions or is not working to the specifications, the sellers need to work with the OEMs to take corrective actions and also manage the supply chain. So from that perspective, our market place policies continue to be very customer friendly. Of course, we would like to know if it is a fake product or not, and therefore we have morphed our polices in line with what OEMs recommend.


Reverse Logistics

 Rishi: Let me again get back to the genesis of the products. The industry starts from the reverse logistics warehouses of Amazon or Flipkart that are the return warehouses. That’s where various vendors go and bid. Let’s imagine for a second that Amazon continues to be a market place where it allows sellers who then source products from OEMs to sell on the market place to buyers.  And in the prevailing scenario, where large retailers want to cut down on these problems at the sellers or at the market place level, then the problem of the product is owned by the OEM. Then don’t you think there will be a situation where there will be less need for reverse logistics?

Sameer: I think like any business and also for our sellers we have to reduce waste in our system, which will ultimately mean better pricing, more convenience, and more offerings for our customers. But I cannot imagine a scenario where the reverse logistics part of the value chain is not-existent. Of course there are multiple parties in it.                                                                                                                                                                               
                
There are obviously the OEMs, the sellers and the market place, and therefore it becomes complicated to manage and also pinpoint ownership and accountability. But on behalf of our sellers, we have to facilitate seamless functioning of the reverse logistics chain and we have to bring the OEMs into this so that the products can improve. They also have the capabilities to refurbish and I think it is incumbent upon the market place to intervene on behalf of our sellers and the OEMs.

                                  
The other point I want to make is that we are taking a narrow lens when we look at reverse logistics from the perspective of what customers don’t like and of customer abuse and fraud. I think there is a much wider play in terms of really providing affordability to customers and giving them more offers. Let me illustrate that. I have a very well functioning iPhone 7. iPhone 8 is just around the corner. I would love to get a deal to upgrade my product; therefore, my older iPhone 7 will become a part of the reverse logistics chain. These choices are possible because of the technology you can take to your customers to trade in products, to sell to peers, and buy old, used and refurbished products. So I see this actually growing. Because consumers are extremely value conscious in India, this is part of giving them greater value through technology and e-commerce.
 
Also read :
Col Rajiv Bhargava in conversation with Prof. Dr. Chandan Chowdhury


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Reverse Logistics - Imperative for green and smart businesses
The Growing Relevance of Reverse Logistics in India