• Returns Management

Retailers Face Challenges Trying to Stay Afloat in a Sea of Returns

For retailers and wholesalers, keeping up with growing consumer demands, high expectations for fast delivery times, and a seamless online shopping experience isn’t easy. One of the most prevalent challenges in the industry, though, is a seemingly infinite sea of returns washing through warehouses every day.

According to a recent National Retail Federation (NRF) study, 16.5% of retail sales in the United States were returned in 2022 — adding up to $816 billion in merchandise. Unfortunately for the retail industry, that return rate is anticipated to grow in 2023 and beyond as pandemic-era conveniences continue to influence the way consumers shop.

Excessive return rates are a pervasive business problem for retailers and wholesalers alike. Thankfully, several trends are emerging to help mitigate the burden, protect profits, and achieve sustainability goals. 

Offsetting the cost of returns

Staggering return rates of online orders lead to significant costs to retailers. According the NRF, approximately 16.5% of online order value was lost in 2022 — primarily due to the time, money, and labor needed to inspect mail-in returns, execute a quality control process, and decide whether to return items to inventory or scrap them because of damage or health and safety regulations. When large amounts of items bought online are returned in-person at retail locations, the lack of staff and inventory space can slow operations and negatively affect the in-store customer experience.

An additional factor at play here is the increased cost of freight shipping, a consequence of the global pandemic and continued economic aftershocks. Industry experts suggest that charging for returns or offering free returns only to high-value, loyal customers. Although the perk of free returns is attractive to many consumers (and may impact where they choose to shop), popular retailers have either instituted or re-instituted return charges to offset their costs and ultimately deter consumers from intentionally over-buying.

Breaking the bracket

It may surprise consumers that their habit of over-buying and ordering multiple sizes or colors of the same item has a name, bracketing, and it gives retailers shivers. During the pandemic, consumers swapped the in-store fitting room for an in-home room and ordered in bulk with the intention of returning unwanted items in bulk. As retailers know, this practice not only creates an influx of returns that is difficult to keep up with, but it also leads to reduced margins because those returned items are not guaranteed to go back into inventory.

According to a 2022 survey by Narvar Research, 63% of shoppers surveyed admit to bracketing, including 15% who say it is “just how they shop now.” This significant shift in purchasing behavior indicates bracketing is not slowing down any time soon, so what can retailers do to mitigate the most zealous returners? Shortening the window that consumers are allowed to return items can help. For example, establishing a 30-day return window as opposed to 60-day can cut down on the number of returns and potentially deter consumers from considering bracketing. Additionally, certain third-party software can help retailers identify and flag excessive returners.

Keeping shelves stocked

Any supply chain disruption can affect the ability of retailers to keep their inventory stocked. Items continuously sold out or difficult to find, can lead to frustration and may even cause a loss of repeat business. Retailers can improve their inventory visibility and management through automation and software.

Supply chain and logistics companies like Dematic offer software that optimizes the process of receiving and sorting, while reducing dependence on manual labor. Software promotes success with real-time data and visibility over inventory. With consumer demands changing rapidly, having full visibility over inventory allows retailers and wholesalers to plan ahead and meet those demands efficiently. The flexibility of automated receiving systems, such as case and tote conveyors and overhead systems, can the quickly execute operational adjustments.

Seeking sustainability

An unfortunate consequence of the overwhelming rise of returns is their environmental impact. While it is difficult to calculate exactly, industry research estimates approximately 25% of returned items end up in landfills. We know solving sustainability concerns is not one-size-fits-all (forgive the retail pun), but there are actions retailers can take to limit negative effects to the environment.

A few examples:

  • Invest in online fitting technology, which helps consumers make informed decisions and limits the necessity to purchase multiple sizes.
  • Educate shoppers to be more environmentally conscious and aware of the harm of unnecessary waste.
  • And as previously noted, implement charges for returns to reduce the number of returned items and implement better returns handling systems to make putting items back into inventory more efficient. 

How Dematic can help

Returns are as relentless as the tide — as retailers send their products out to consumers, a certain number of them will inevitably flow back. This is why it's so important for retailers to choose a partner with the experience, tools, and capacity to help them handle their returns processes (and potentially turn them into a competitive advantage).

Dematic software modules can be configured to process returns based on retailer-specific business rules. Dematic can provide a variety of systems and solutions, including the Dematic Pouch Sorter, that are engineered to process returns efficiently so those returns are put back into inventory and ready for order fulfillment quickly. Dematic products like the the Dematic Multishuttle are optimized to buffer returned goods and support real-time decisions for reselling or returning to stock.

If you're a retailer, contact Dematic to find out how we can help you keep afloat in your sea of returns!

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