Facing Down Your Returned & Excess Inventory? Here’s What to Keep in Mind.

What is it that separates top consumer goods brands and retailers from the rest of the pack? Having well-designed, thoroughly tested products is one obvious answer. And there’s definitely something to be said for a helpful and efficient shopping experience, be it in person or online. Even slick, high-production-value advertisements lend widespread credibility to such a company. But as any leader in the space will tell you, many aspects contribute toward a business’ ongoing profitability and success as a world-class source of consumer goods.

While consumer experience, marketing and the products themselves tend to stand front and center, areas of operation such as warehouse optimization, inventory management, and logistics hum along powering the business from behind the scenes—and they’re no less important to the big picture.

Whether you’re a retailer or a manufacturer, it’s critical that you keep your warehouses, distribution centers, and loading docks neat and clear.

According to the National Retail Federation (NRF), unsold inventory imposes a cost of $224 billion to American retailers each year. This is why it’s imperative for warehouse teams and returns processing systems to operate at peak efficiency, particularly during the initial weeks of a new business cycle or periods following surges in sales and returns. Such times might include the annual year-end holiday rush, the transition out of winter into the warm months, back-to-school time, the immediate aftermath of a new product launch or major marketing campaign, and so on.

Take this past holiday season for example: With Americans spending $964.4 billion during this past holiday season alone (a number on the high end of NRF’s original projections) the return of unwanted items following sales periods once again inundated warehouses with additional inventory, compounding the existing stock that remained unsold. This year, studies show that the value of returns from late November through January totaled more than $100 billion.

Even though businesses across the country have enacted new strategies to reduce return rates, returned inventory management remains a persistent challenge for businesses. Therefore, proactive measures are necessary to alleviate this issue, no matter the time of year. But where should you start?

Whether you’re looking to improve existing inventory management practices or are just beginning this journey as an up-and-coming brand or retailer, here are five tips for planning your inventory management and reduction strategies.

1. Strive to Create Space

Accommodating the influx of returned inventory presents retail and brand leaders with substantial challenges in terms of warehouse space allocation. For smaller businesses dealing predominantly with consumer items like handheld electronics, purses, or jewelry, managing warehouse inventory may be relatively straightforward due to their minimal space requirements and reasonable margins. Companies may decide to keep such items on hand despite slow sales, perhaps in anticipation of an opportunity to sell them later down the road. 

But not all businesses have this luxury. Consider a company specializing in appliances, furniture, or other such home goods. These bulky, heavy items may require special equipment, extra time, and additional manpower to store or move across the country. Even companies handling more compact stock like the items mentioned above run into problems when operating at a significant scale. In reality, any type of good can become problematic when stock begins to pile up in warehouses, distribution centers, and loading docks. Aside from the obvious problem—the opportunity cost of surplus-occupied warehouse space—inventory pileups can pose potential safety hazards for warehouse staff, increasing the business’ overall liability.

At least a few of the practices you adopt should be designed to address the space issue. Similarly, any solution or partner that you engage should be able to explain exactly what they do to prioritize concerns around the availability of physical space in your facilities.

2. Adopt of Automated & Analytical Solutions

Leading brands and retailers have recently begun escalating their investments in artificial intelligence, machine learning, and advanced data analytics to enhance the efficiency of the processing of excess inventory and returns. Automation and data analysis offer several advantages in return processing, including streamlined verification and accurate sorting of returned items, expedited decision-making regarding product resale or repairs, error reduction in manual processes, and early identification of trends in returns data to facilitate faster refunds or exchanges.

Solutions worth considering should include or integrate with modern AI and process automation capabilities, and they absolutely must be data-driven—if you can’t track the performance of a practice or that you’re thinking of implementing, don’t expect buy-in from other stakeholders who will expect your organization to keep up with competition.

3. Engage with 3PL Specialists

Third-party logistics (3PL) solutions play a crucial role in performing essential supply chain functions, streamlining processes such as point-to-point shipping, or negotiating favorable prices with carriers. As another example, hiring a 3PL partner to implement a cross-docking program, means your organization’s goods will undergo minimal handling and time in storage when traveling the country. This keeps your warehouse space—an increasingly valuable commodity—as clear as possible. 

Between their large, capable vehicle fleets and focus on moving goods efficiently, 3PL companies ensure broad geographic coverage, more timely pickups and deliveries, and better tracking and documentation than less-specialized approaches might offer. When it comes to handling sporadic inventory fluctuation, there’s little reason to rely strictly on in-house methods.

4. Aim to Boost Velocity

When reselling excess and returned goods into the secondary market, velocity can be as important as recovery price. Why is this? Firstly, slow-moving inventory comes with carrying costs—this simply means the price of moving and storing goods. Secondly, excess goods incur opportunity costs, the value you’re sacrificing by not using your resources to hold and move better-performing products.  Finally, the value of most goods depreciates over time, with items like apparel and electronic technology, falling out of fashion and into obsolescence particularly quickly.

If this sounds familiar, then elevating cycle time to a key metric may be an important step for your business to take. Simply tracking time isn’t enough, however. The value of process innovations that streamline the outflow of goods and an ever-replenishing supply of global buyers to take on these gods cannot be overstated, but this is easier said than done.

5. Emphasize Predictability

There are countless regional retail chains, SMBs, Mom & Pop Shops, and entrepreneurs running online stores as side-hustles. As a retailer or manufacturer, you should view their perpetual demand for affordable high-quality stock as an opportunity to consistently clear your own warehouses of significant amounts of new but unsold or once-bought inventory. 

An ideal reverse logistics partner should certainly be able to connect your business with buyers and even manage logistical aspects of excess inventory sales. Fewer of these services, however, can assist in securing guaranteed pricing through various sales models, including time-bound contracts. Collaborating with this rarer breed of recommerce partner will ensure that your goods are spoken for well ahead of time, aiding your financial projections and avoiding the occasional warehouse pileups that can throw off your business at inopportune times. And just as you prize predictability, your buyers will appreciate knowing that their own shelves won’t run dry of the goods they rely on—and this goes a long way toward building resilient, trusting relationships that will remain strong for years to come.

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Given the unceasing sale and return of consumer goods, retail executives and their teams have realized that handling remarketing in-house is simply not sustainable. Alternative solutions like donation and recycling often entail navigating regulations, high managerial oversight, and additional costs given the sheer volume of goods in play. Many companies already sell goods in bulk to qualified buyers, but some leading brands and retailers have taken this approach a step further by engaging dedicated recommerce partners to help them build complete, managed reverse logistics programs.

B-Stock, the world’s leading B2B marketplace for returned and excess inventory, delivers a unique blend of benefits that separate it from other options. Our global buyer network provides unending demand for—and competition over—your surplus goods. Multiple flexible sales models, including spot auctions, pre-negotiated contracts, effortless brokered sales, enable your organization prioritize recovery rate, predictability, or pure velocity. Nearly twenty years of marketplace data combined with advanced predictive analytics mean that our experts can effectively advise you on how to list, group, and price your lots for maximum return on investment. These benefits—not to mention numerous compliance-minded features, a responsive customer support team, exclusive partnerships with trusted 3PL companies, and more—all work to drive strong recovery at any volume.

Want to learn more? Explore our platform today.