Online selling has many advantages, but not when it comes to product returns. The average return rate is three times higher for online purchases than those made at brick-and-mortar retailers.
Melissa Gieringer spent the last eight years working at online marketplace companies that provide solutions for retailers’ and manufacturers’ returned, excess, or other liquidation inventory. Now a director at B-Stock, she’s shares some advice with EcommerceBytes Editor Ina Steiner on how readers can deal with returns.
There are many reasons behind product returns. Online shoppers can’t see or try on items until the items arrive on their doorstep, which can lead to disappointment. Some shoppers develop a case of buyer’s remorse. And then there are the chronic returners and out-and-out scammers.
Given the hassles and costs associated with returns, it’s understandable why online sellers want to find ways to reduce them, especially during and after the busy holiday shopping season.
According to B-Stock’s Melissa Gieringer, ecommerce sales have an average return rate of 30% compared to 8-10% for brick-and-mortar purchases. But those numbers vary widely by product category. For example, the return rate for Housewares is 12%, while Apparel has a 30% return rate – and that number grows to 50% around the holidays, she said. With the diversity of products (and types of sellers), there’s no “one size fits all” strategy for dealing with returns, but there are some tips to keep in mind.
B-Stock operates the world’s largest network of liquidation marketplaces – it recently launched a B2B marketplace for DICK’S Sporting Goods. Gieringer said that across B-Stock’s 40 retailer marketplaces, close to 70% of the inventory is customer returns, with the remaining inventory consisting of overstock or salvage.
How can sellers avoid returns in the first place? Retailers are employing a variety of strategies, she said. For example, Jet.com offers a lower price if the consumer opts out of the free return policy, while companies like Dockers.com provide additional fitting details such as inseam and thigh-opening measurements.
Some retailers are using augmented reality apps to give shoppers a better way of visualizing the product and thereby cutting down on buyer’s remorse, which accounts for 25% of online returns, she said.
Some businesses are even monitoring returns to identify chronic returners with the help of third party solutions. In an article about Best Buy’s outlet store where it offers discounts on returned goods, the Houston Chronicle wrote, “Retailers in recent years have reined in return policies, shortening return periods and cracking down on serial returners. Companies are also increasingly investing in so-called “reverse logistics” to inspect, sort and find alternative outlets to recycle, donate or resell its returned goods.”
Reduce Shoppers’ Returns Anxiety
It may be helpful to think about returns from the buyer’s perspective. In its third annual report on returns, “The State of Online Returns: A Global Study,” Narvar identified the top complaints from consumers with regard to returns:
- paying for shipping;
- lack of communication regarding return status;
- and not knowing when they will get their refund.
The study found that 16% of customers were frustrated with checking the refund status of their return. The key to minimizing customer angst: “Communication can resolve most of these concerns,” according to Narvar’s findings.
Dealing with the Inevitable Returns
Returns are inevitable for most merchants, so having strategies in place to deal with them is important. That’s even more true as retailers find themselves increasingly placed under the microscope for sustainable business practices. “Landfilling is not an option any longer, and destroying inventory puts a brand’s reputation at risk,” Gieringer said.
She offered two tips on when it comes to returns:
Make sure you have a favorable and clear return policy:
“Favorable return policies drive customer loyalty: studies show around 82% of online customers will complete an online purchase when there is a favorable returns policy. While it seems counterintuitive, offering free returns and longer return windows is a smart move as it actually encourages initial and repeat purchases.
“Around 67% of customers check the returns policy before buying, so make sure yours is clear and understandable. If the return policy is confusing, but the competition has a simple and clear policy – guess where a customer will be making their purchase?”
Process back on shelves as quickly as possible:
“To maintain retail margins, you want to get returned items – the ones in good resellable condition – back on the shelves, and inventoried as fast as possible. There are SaaS returns management systems available that provide real-time updates when merchandise is returned into the inventory system.
“Keep in mind, the faster it is re-inventoried, the faster it can be shown to other customers, online. Real-time re-entry into the inventory system also means the store can reshelve the merchandise immediately.”
Gieringer noted that unless there is a defect with the product, or the packaging has been damaged, or the product has become obsolete, you should not feel the need to discount a product’s price. “As much as possible, avoid discounting goods on your primary sales channel. This will set customer expectations,” she said.
Create a Resale Channel
She also recommended merchants create a resale channel. “For returned inventory that can’t go back on primary shelves and sold at full price, a recommerce or resale channel – like the one B-Stock provides – is essential. This should be an ongoing, strategic solution that enables you to move the returned inventory out of your warehouse quickly.”
The channel you choose should ideally allow for: high recovery, a fast sales cycle (to prevent warehouse overflow), and brand protection.
Companies like Patagonia and Madewell have created their own private-label sites to resell used, repaired or rebuilt items to consumers, she said – all the items have been inspected and are sold at a discounted, set price.
Third-party resale marketplaces like eBay, Amazon, Poshmark or ThredUp are also good options.
Gieringer also recommended a B2B (business-to-business) online auction marketplace like the B-Stock Supply marketplace, which can provide a faster sales cycle while maintaining decent pricing.
If you’re worried about channel conflict, set limitations for buyers including the following:
- exclude resale on 3rd party sites;
- establish geographical limitations;
- set remarketing rules;
- sell only to exporters;
- mandate all items be delabeled prior to resale.
Donate or Salvage the Unsellable
For returns that can’t be resold, what’s the best way to dispose of them?
Consider donating to a recycling company, Gieringer said. Many recycling facilities will take end-of-life goods in order to break down parts or – in the case of textiles – recycle into new goods.
“Believe it or not there is a large buyer base interested in Salvage/Grade D inventory. For example, when it comes to end-of-life electronics, the inventory can often be sold to recyclers or refurbishers that use parts in other devices. B-Stock has a large base of buyers who solely purchase salvage goods for recycling or parts harvesting.”
Gieringer called Amazon’s recent launch of FBA Donations a great program as it allows merchants a charitable disposition channel and prevents obsolete/unsold goods from being destroyed. “No doubt a win, win.”
However, she said merchants may not be okay with their items ending back up for sale on Amazon or another marketplace.
“For merchants with brand sensitivity concerns, chose a donation method that gives you full visibility into where your merchandise will ultimately end up and/or the ability to dictate that.
“You might also want to consider delabeling your goods prior to donation.”
To sum it up, Gieringer said, “Returns are the rule in retail; an ongoing, proactive plan for them is crucial. This should include a secondary market/resale channel for goods that can’t go back on primary shelves. The channel you choose should ideally allow for: high recovery, a fast sales cycle (to prevent warehouse overflow), and brand protection.”
It’s also worth noting that those resale channels also provide opportunities for resellers. On B-Stock, resellers can buy anywhere from a few pallets to multiple truckloads of inventory across dozens of categories including apparel, appliances, electronics, home décor, mobile phones, and more, Gieringer said.