The holiday season is officially over, but the return season has just begun. And many companies are not sure how to best catch these products that have boomeranged back to them.
Industry pundits estimate that as many as 60% of total returns are received by retailers in the first quarter of the year. That means that retailers right now are dealing with the massive returns they face after every holiday season – a number that seems to be growing each year.
In fact, in 2014, returns were up more than 66% from the previous year, with U.S. shoppers returning an estimated $260 billion in merchandise, according to an article in The New York Times.
The sobering reality is that retailers this season could be facing an even higher number of post-holiday returns. That's because for the first time ever, estimates indicate that more people shopped online during Thanksgiving weekend than shopped in stores, according to a National Retail Federation sentiment survey. In fact, U.S. consumers spent $4.45 billion online on Thanksgiving and Black Friday, according to Adobe.
And as all retailers know, return rates for online sales are generally higher than those for in-store retail sales. In fact, at a minimum, an estimated 15% of all Internet sales end up being returned, while only 8% of brick-and-mortar store purchases are returned, according to the New York Times article.
Unfortunately, much of this returned merchandise ends up as lost revenue for retailers. An estimated 2 million tons of returned merchandise – much of it undamaged – is thrown away every year, according to a report titled Brand Protection and Supply Chain Integrity: Methods for Counterfeit Detection, Prevention and Deterrence. Of course, a retailer's primary goal is to recover as much revenue as possible from that returned merchandise. But retailers really have only three basic choices when it comes to managing returns:
- Outsource their returns – either part or all – to a third party.
- Set up a reverse logistics operation in a separate warehouse.
- Rely on the returns process they've already developed and simply beef up those operations in the first quarter.
No matter which reverse logistics strategy a retailer selects, the right technology can help retailers streamline the return process and reduce the losses they experience.
For instance, many products are returned without their original packaging, so associates may find themselves with no barcodes to scan and thus no product information whatsoever about those returns. That's why some retailers are starting to include pictures in their product file database so they can properly label returned merchandise. Using the right technology, associates can also send pictures to managers to determine whether product damage makes something unsalvageable.
RFID technology can also help streamline the return process by allowing retailers to identify possible counterfeit products – which cost manufacturers, retailers and consumers an estimated $1 trillion each year, according to the Brand Protection and Supply Chain Integrity report. Through the operational visibility it provides, RFID can also make the receiving and restocking process more efficient by allowing faster, non-line-of-sight scanning of products.
As e-commerce continues to become a larger part of sales, the returns process will continue to play a larger role in a retailer's everyday operations – not just after the holiday season. That's why savvy retailers are figuring out how the right technology at the right time can help them better handle these returns in the future.