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If you’re a retailer in 2021, product returns are a simple fact of life. Brands like Amazon have long featured free, unlimited, and seamless returns as a key part of their service’s value proposition. This model has brought them massive success and at made it clear that consumers expect to be able to return anything, no questions asked. Giants in the the retail industry remain profitable enough that returned merchandise presents no problem. But not all businesses share this experience.
Unfortunately, this trend has placed countless retailers in hot water. With the holidays looming ahead of us, stores face considerable challenges in dealing with the incoming wave of returned merchandise. Read on to learn more about these sky-high return rates, the reasons behind them and how retailers can handle the excess inventory as efficiently as possible.
With so many products, shoppers, retailers, and manufacturers participating in the market these days, this is a tough figure to accurately estimate. The best guesses of industry experts indicate that anywhere from 15% to nearly one third of all goods purchased online are returned. In 2020, this amounted to over $100 billion worth of online returns.
Even if the return rate remains static, the issues caused by mountains of returns can keep growing. This is because online shopping as a whole is growing. For example, in the apparel sector, e-Commerce grew by a massive 35% in 2020, according to a McKinsey study.
Without fail, e-Commerce surges in Q4, meaning purchases and returns are especially concentrated within just a few months. In fact, 2021’s holiday retail sales are expected to top previous records, growing between 8.5-10.5% year over year. This will total between $843.4 billion and 859 billion for all online and in-store purchases. Assuming an average return rate of 13.3% for all these goods, retailers can expect to get back approximately $112-114 billion worth of merchandise this holiday season.
There’s certainly a strong argument that the pandemic was behind the enormous upswing in e-Commerce. At the height of social distancing, items from pants previously perused in person to families’ weekly groceries were dropped into a virtual cart and delivered right to the buyer.
But now that the appeal is known and understood, it’s quite possible that in-person shopping never fully recovers. Even as we emerge from the pandemic, online shopping seems to have settled at a higher level than ever before, continuing a long-term upward trajectory.
There are a handful of reasons a customer might opt to send something back. Here are some of the top causes for merchandise return.
Great makers and stores stand behind their products, so this is what comes to mind for many when they think of returns. If an item doesn’t live up to expectations, arrives damaged, or contains a factory defect, the shopper has a good case to send the purchase away.
There’s no way to know how some purchases will fit your needs until you see them in person. Even with AR stepping up to help with this issue, it’s a tough problem to solve. Many people resort to bracketing, the practice of buying multiple sizes and colors with the intent to send most of them back.
This is most common with clothing, although it can happen with furniture, appliances, and other categories too. In such cases, there’s absolutely nothing wrong with the products themselves.
From a dress for a wedding to a new TV for the Superbowl, many items are time-sensitive purchases for their buyers. If the window of need passes, a perfectly good item might be of no use to a shopper
Considering that 33% of delays are due to couriers and delivery services, this issue is nearly beyond retailers’ control. Still, retailers expect that a good many holiday supplies and gifts will not arrive on time and wind up back in their warehouses.
Whether it’s on the part of the store or the shopper, mistakes happen. When the wrong item arrives on their doorstep, consumers will most often ship it right back. If the problem was due to a mix up on the store’s end, consumers are especially reluctant to absorb the cost.
Brick-and-mortar stores have long offered price-matching guarantees. With direct-to-door shipping, however, online shopping makes these policies somewhat obsolete. Often a shopper will see a better deal before they begin to use what you shipped them. In this case, they won’t hesitate take their business elsewhere without a though for how returned merchandise effects businesses.
It’s possible that the recipient of a gift already has something like it. Perhaps the gift simply wasn’t as well-received as the giver had hoped. Further, any of the reasons above could also apply to gifts.
Although large-scale gift returns are rather unique to the holiday season, retailers will have to handle them all the same.
By 2020 estimates, 7.5% of online returns are fraudulent in some way. While not an overwhelming percentage, retailers still must build this into their operating costs.
Unfortunately, there is little that retailers can do to crack down short of making the returns process significantly more expensive to them or tightening policies on honest customers.
If this inventory is in such good condition, it should be a snap to resell, right? Not so—and retailers know it. The steps required to get even pristine merchandise back on shelves are numerous and, too often, prohibitively expensive.
Processing returned merchandise in large quantities requires transportation, dedicated facilities, specialized scanning and sorting equipment, and staff. This all represents significant resources.
Items condition can range from flawless to broken, so inspection and repackaging will be necessary. Sending broken items or damaged packaging to just a few customers could lose you lifetimes of business.
Most operations today have electronic inventory management systems to track products for financial, logistical, and forecasting. Even with modern tools, this can be a time sink.
Whether brick-and-mortar or online, stores need to accurately place returned merchandise back in their correct shelf or bin to ensure shoppers find and receive what they need.
Between the looming holidays, ensuing return rush, and current labor and supply chain issues, these steps may not be viable for stores that could formerly afford them.
As you can see, it’s sometimes retailers and manufacturers that are responsible for today’s high return rate. Other times, it’s opportunistic shoppers abusing the system. But as with so many other conflicts in life, most returns are no-fault. Regardless of blame, however, it’s the retailer that ultimately has to deal with the massive quantities of returned inventory.
The problem is not lost on businesses. In fact, according to the McKinsey study, 83% of retailers identified returns as an ongoing threat to their overall profitability.
Sadly, a large portion—as much as 25%—of returned merchandise is destroyed when they’re deemed too expensive to process. Whether being burned or landfilled, these tactics are bad for business and brand reputation.
If retailers are not reselling it, recycling it, destroying it, or warehousing it indefinitely, companies are likely selling their returns and overstock to traditional liquidators.
These operations make rock-bottom offers on retailers’ excess merchandise, often just pennies per unit. They then sell this merchandise at a profit to small businesses or other liquidators. Each layer takes their cut of the inventory’s value. Counting on retailers’ desperation to offload rapidly aging merchandise, any negotiating that these liquidators do tends to be talking the price down.
Retailers who find themselves in need of some support in managing holiday returns, the help they seek comes in the form of a powerful, wide-reaching online auction platform.
Skipping the middlemen of the traditional liquidation process, B-Stock’s online private auctions are the fastest and most efficient way to inject your goods into the secondary market That’s because B-Stock connects retailers both enterprise-sized and smaller in size and volume directly to a network of over 500,000 small business buyers that make their fortunes reselling returns, overstock and scratch-and-dent items of all categories.
These entrepreneuring folks will gladly take your merchandise and handle the steps outlined above—inspecting, repackaging, etc.—while you recover more than you thought possible. How? Instead of liquidators talking your prices down to pad their own margins, live auctions create competition. This drives prices up, securing the highest willingness to pay for each and every lot that you list. In fact, many of B-Stocks partners boost their recovery rates 30% beyond what they received from their traditional liquidation, with cash in hand in as little as 15 days from registering.
But B-Stock is about more than just high recovery and quick closeouts. You can even enforce seller agreements to dictate how and where your products are sold. This is a key means of protecting your brand’s hard-earned reputation and your primary sales channels.
With benefits beyond just clearing space in your warehouses, B-Stock will help you kick off 2022 with a win and keep spirits—and efficiency—high all year long.
To learn more about how B-Stock dramatically reduces the time and energy you spend dealing with returned merchandise this season, contact us today.