Winning Strategies for Returns Management

By Jim Rallo, president, retail supply chain group, Liquidity Services Inc.

The retail industry has seen its fair share of challenges in recent years with decreased foot traffic through stores as consumers move online to purchase products. Regardless of where consumers purchase goods, returns are an issue with the NRF estimating the amount of merchandise returned in 2013 totaling $267.3 billion.

To improve cost efficiency, retailers are working to improve overall supply chain performance. In addition, increased use of social media and changing regulations has emphasized the importance of brand protection and the need to support sustainability initiatives across the enterprise. By addressing these trends through the reverse supply chain where returned and overstock inventory is managed, companies can focus their employee time on customer interaction and increase recovery in secondary markets while supporting the larger strategic goals of the organization.

A Better Way Forward for Returned and Overstock Inventory
Retailers invest millions to bring customers into their stores and increase interaction with their brand. However, when a customer decides to return an item, the behind-the-scenes process receives significantly less attention, and has the potential to cost retailers valuable margin and buyer loyalty. By working with a trusted provider to address challenges and leveraging trends in the reverse supply chain, retailers can align their returns process with best-in-class practices.

Create a High-Performance Reverse Supply Chain
Working harder to obtain market share means the costs to stay top-of-mind have continued to increase, while retail sales have slowed. To remain competitive, retailers have to optimize their supply chain, decreasing costs. A capable service provider can work with a retailer to leverage technology and proven processes to streamline operations.

For example, many retail warehouses boast sophisticated warehouse management systems (WMS) to manage the forward flow of goods, but few invest in a robust WMS for the reverse supply chain. Vendors should be able to handle both sides of the profit equation. On one side, they can manage costs through accessible distribution centers equipped with world-class WMS and data and analytics to measure results. On the other side, they play a role in managing revenue – driving higher recovery by tapping a large buyer base and providing superior marketing and sales strategies.

Protect the Brand in Secondary Markets
Secondary markets can be fraught with risk. Without appropriate guidance, a retailer’s brand can be negatively impacted. Comprehensive vendor services should include data wiping on electronics to ensure that customer data on a returned laptop, game system, or tablet, does not end up in the wrong hands. Second, retailers need to manage merchandising to ensure that products are accurately described. In a recently conducted survey, we found that 79% of consumers consider accurate product information on refurbished products to be important. Third, retailers have to manage where product is sold. From EBay to boutique online stores to flea markets, there are a number of places where returned product could potentially end up. By directing the right product through the right channels, audiences are appropriately targeted.

Finally, it’s critical to manage the customer experience – which varies by channel. The same customer that enjoyed a top-notch in-store engagement might have a frustrating experience in secondary markets, potentially costing the retailer their brand loyalty. Rather than leaving the brand open to potential risk by selling product through a channel that lacks a customer service department or utilizes incomplete product information, a retailer can ensure that channel use aligns with larger company goals by employing a vendor who knows how to navigate secondary markets. Vendors should also be able to provide retail clients with complete transparency into the process with regular reporting against the metrics needed to ensure success.

Focus on a Sustainable Process
Retailers can boost sustainability metrics for the entire company by following the “R” Cycle in returns management: Re-use, Re-furbish, Re-commerce, Re-distribute, and then Re-cycle. The return-to-vendor (RTV) process often hinders efforts to improve sustainability due to landfill disposal protocols. In addition to being environmentally-unfriendly, this practice includes expensive landfill fees on top of lost profits. An experienced provider will be able to work between retailers and OEMs to create mutually-aligned incentives in the RTV process, ultimately deferring product from landfills, providing a second life for goods, and improving brand loyalty for environmentally focused customers.

With the right process and the right partner, managing returns and dealing with overstock does not have to be a headache. The reverse supply chain provides opportunity for retailers to create competitive advantage and produce results that support larger strategic goals, whether that be streamlining the supply chain, improving brand perception, or enhancing sustainability initiatives. By better managing the returns management process, retailers can increase recovery and cut costs, while addressing risks in the new retail supply chain with winning strategies.

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