By 2027, the value of consumer returns will near $1 trillion. Current trends show that the majority of these returns will stem from e-commerce; which currently has a 30% return rate. Online returns are caused in part by lax return policies; these policies are in place to attract and retain loyal customers who now expect to return anything at anytime at any location for any reason. This creates three priorities for reverse logistics professionals who must 1) keep warehouse inventory flowing; 2) increase recovery rates against the rising costs of labor, processing, and shipping; and 3) retain brand protection.
Studying Return Rate Projections
The best advice for retailers on how to handle consumer returns is to look at return rate projections to help determine warehouse and labor costs. For many retailers, this means looking at historical return rates to help predict future return rates. It’s also important to look at new technological developments, especially with new appliance models that are starting to include IoT tech. It’s always important to keep in mind that as new models come out, that will make older or current models obsolete. So, as new models are developed and produced, it’s important to forecast how many of the existing, unsold models will have to be liquidated.
Top Concerns with Consumer Returns
Major retailers of all types have three major concerns when it comes to consumer returns: velocity, recovery rates, and brand protection.
For some retailers, velocity is the biggest concern with the need to keep inventory flowing so that warehouses do not become backed up and overflowing. When faced with 30% of online returns coming back, keeping inventory moving is necessary. Having a fast and easy way to liquidate returns becomes essential to keeping processing, shipping, warehouse, and labor costs down.
Retailers need a plan in place to auction off their excess inventory, where lots (anything from a pallet to a full truckload of inventory) are sold at current market value. For this to happen, retailers need a buyer base of professional resellers that are looking to purchase liquidated inventory for their own clearance and discount stores. Most of these SMB resellers are located in small, rural towns that do not have access to big box stores. These resellers are constantly looking for a steady stream of inventory to stock their shelves and will bid on wholesale, liquidation lots. When a group of resellers start bidding on the same lots, that’s when recovery rates increase.
For many retailers, brand protection is a top priority, especially considering the high quality of products being produced. It becomes important then that any product that is sold into the secondary market has any and all restrictions honored by the buyer. B-Stock has guidelines and best practices put in place to work with clients to help ensure that buyers will adhere to any kind of de-labeling requirements or any kind of geographic limitations that clients require.
Top Reasons for Returns
One of the biggest topics for reverse logistics professionals is to learn why a product is returned. It’s hard to know the real reason why consumers return a product because they are not always honest. This is especially true for in-store returns. When a customer is face-to-face with a store manager and they are asked why they are returning an item, they aren’t always honest. Many people become nervous when speaking to a store manager and they will often make up a reason for the return. Most of the time, there’s nothing wrong with the product, and the reason is simply buyer remorse. This is especially true with higher ticket items such as major appliances.
To help gain more truthful responses from consumers, analysis has shown that when consumers return items through an app, they tend to be more honest because they are responding to a screen instead of a person.
To learn more about B-Stock, we invite you to review our case studies and our suite of private marketplaces that we operate for 9 of the top 10 U.S. retailers and hundreds more.