Is your business ready for the next busy returns season?
Online purchasing this most recent holiday season was at an all-time high in a record-breaking year for retail sales as a whole. After those gifts were opened, many were returned for an endless variety of reasons — too big, too small, duplicates, and so on.
Consumers continue to shift to online purchases, whether due to ongoing supply chain issues or simple convenience. But no matter how this may have affected your sales, it’s time to develop a serious strategy for handling returns. Here are the top five considerations for retailers to prepare for the next returns season.
1. Return rates will be epic
Data from retailers suggests that as much as 30% of products bought online are returned — a number we only expect to grow. Many retailers and wholesalers are experiencing increasing quantities of returned merchandise from their e-commerce sales channels. Processing these returns can result in lower efficiency, higher operating costs, and too much time spent getting merchandise “sale-ready,” ultimately resulting in lost sales.
Retailers cannot afford for returns to be an afterthought. Dematic’s returns subsystem has been developed from customer requests for a more focused approach to returns processing. The process flow of goods through the system is turnkey — from going through the dock door all the way through getting it back to a sellable state.
2. Sales increase when returned items go back online faster
Returns can often result in lost revenue for retailers, but if you can create an efficient process (a two-day reprocessing time is ideal) and implement the right solutions for getting that product back into inventory, you have a greater chance of reselling it. A couple of days can be the difference between an item being resold or thrown out. Processing returns can be especially problematic during peak seasons when many retailers are running popular promotions, but it’s important to implement process improvements that will help with processing speed, labor productivity, balanced workflows, and order accuracy.
Recently, we helped a customer that was challenged with a high proportion of returns by implementing a modular and scalable pouch sorting system. Their original returns process was manual and time-consuming — our flexible pouch sorter solution helped simplify the process by taking advantage of unused vertical space in the warehouse logistics area for a wide variety of product shapes and sizes. The solution reduced the time a returned item was available in inventory from several days to less than an hour.
3. Returns have a massive cost on the environment
During the pandemic, e-commerce orders have consistently generated returns more frequently than brick-and-mortar purchases. According to a National Retail Federation survey, online returns more than doubled in 2020. An unfortunate consequence has been the environmental impact of high returns rates with a staggering 25% of returns will end up in landfills. While the reasons for throwing out returns varies — from damaged goods to health and safety regulations — the sustainability consequences are hard to ignore. More than ever, consumers are overwhelmingly looking for brands to incorporate sustainability efforts into their overall business practices.
At the most recent Dematic Material Handling and Logistics Conference, one of our speakers in the fashion industry shared how his company uses artificial intelligence to calculate the probability of a consumer buying and returning a clothing item and using that data to deliver customized recommendations that are less likely to be returned. In the fashion industry where fast fashion churns out clothes to keep up with consumer demand, data can help companies prevent returns.
4. Be flexible with changing demands for the season
The holidays create a spike in returns activity, with January 2 as the most popular day for returns. Most retailers have been laser-focused on fulfillment of existing orders. But more sales just make it more important to prepare for the inevitable returns. Things to consider:
- Organize staff for managing returns and start developing processes.
- Capture as much data as possible on returns (reasons, products, etc.) to aid in future plans.
- Once the current rush of the holiday returns is over, think about how to work returns into your overall fulfillment solutions so that next year processes will be more efficient:
- Do you have the right warehouse management systems in place to understand and track your returns
- Is your existing technology set up to efficiently and quickly put returns back into inventory?
5. Control your controllables
While data can help retailers understand consumer behaviors and deliver custom recommendations to lower the probability of return, there are other ways that retailers can help mitigate returns. It’s estimated that 65% of returns are due to:
- goods being damaged
- items not being as described
- wrong items being sent
To address those issues, optimize front-end process with well-described and depicted items, implement cut-to-fit packaging to prevent damage in transit, and consider automated picking systems that provide better control of inventory and increased accuracy on the fulfillment side. Additionally, evaluate any existing automation software to ensure that it is maximizing the speed and accuracy of your operations. Software and the data output it provides are key to a holistic fulfilment and returns process.