EcommerceBytes-NewsFlash, Number 3060 - May 08, 2013     2 of 5

The Silver Lining in Product Returns

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Online retailers experience nearly twice the return rates of brick-and-mortar retailers, and with ecommerce growing faster than offline sales, that provides both a challenge and an opportunity for merchants, according to Rob Caskey, Vice President of Marketing and Direct Sales for Liquidity Services' Retail Supply Chain Group, which includes the Liquidation.com and Secondipity.com marketplaces.

Caskey says consumers are demanding more from retailers of all sizes when it comes to returns. "Many retailers have adapted to meet customer expectations including free shipping on returns or an extended number of days that a consumer can return an item. However, many retailers have refused to budge on return policies as returning items is a costly endeavor for retailers."

When larger retailers loosen their restrictive return policies, it makes it more difficult for smaller retailers to compete. "In spite of this," Caskey said, "many smaller merchants are hoping to tap customer loyalty and looking at other ways to enhance the customer experience. Many smaller merchants simply cannot afford to be more flexible with their return policies."

The Consumer Electronics category sees higher return rates thanks to consumer frustration around product use or buyer's remorse, and Caskey said many of those items arrive in Liquidation warehouses in "like new" status. As a result, a few retailers are choosing to tighten return policies on costly consumer electronics, shortening the window for consumers to take their items back to stores and return them through the mail.

Most of the time, the consumer bears the cost of shipping returns in order to discourage them from returning the item. However, a few of the larger online retailers provide free shipping for returns. Caskey said while it's expensive to provide this service, they have seen benefits in customer loyalty and growth in their customer base.

Caskey advised retailers to provide an opportunity for customers to return items - that would be a start, he said, as some smaller online sellers opt to not allow refunds due to cost as well as the time incurred to manage the flow of returns. "It may save some money to refuse returns, but it hurts the ability to build long-term relationships with your customers," he said.

Caskey also shared some tips with EcommerceBytes on using returned goods as a source of product inventory.

EcommerceBytes: What are some tips for online sellers on using returned goods as a product source? How do they ensure the products are in good condition?

Rob Caskey: Products can range greatly by condition; this may include: new, light use, heavy use, refurbished, shelf pulls and salvage. Read the product description in full and the categories of conditions by the seller to know what you are buying before you purchase to help you determine how to sell the goods.

On the Liquidation.com website we provide a detailed, consumer-friendly explanation of each product code. Keep in mind that vendors can vary in terms of the type of products and services they provide for buyers. It's important to examine factors such as detailed product information, flexibility in quantities, and shipping options, to determine an online source that will work for your business.

Plan to source your products from marketplaces that provide superior product information such as detailed product descriptions, digital images, shipping dimensions, condition code, and technical information, if applicable.

EcommerceBytes: What are some common mistakes sellers make in sourcing returns and excess inventory to resell?

Rob Caskey: One of the most common mistakes is buying the wrong quantities for a particular sales channel. The most successful buyers purchase the right quantity for their needs. While larger lots provide a lower cost per item, you don't want to purchase more than you can sell. Define your strategic sourcing plan and stick to it.

EcommerceBytes: What kind of margin are sellers seeing in the sale of returned goods?

Rob Caskey: Smaller merchants that source their goods by utilizing a trusted online marketplace such as Liquidation.com might see an increase of 20 percent or more in reselling overstock and returned goods. However, this can vary greatly on a number of circumstances such as condition of goods and demand for certain items.

EcommerceBytes: What is the average discount on retail prices on Liquidation.com?

Rob Caskey: As these items are in a bidding environment - the discount often depends on the type of product and timing. Discounts can often be anywhere from 10 to 80 percent off of MSRP, so there are good deals available and you'll never pay more than you want. On the Liquidation.com site, buyers are able to view the original MSRP of the merchandise so they know exactly what kind of deal they are getting.

EcommerceBytes: And in the case of your marketplace, does Liquidation.com accept returns or is it an "as-is" marketplace?

Rob Caskey: Liquidation.com is primarily an as-is marketplace. But if goods are not represented accurately for some reason or if there's a difference in quantity received, buyers have the opportunity to file a dispute that we can address and rectify. Buyers can also inspect goods if they are picking up from Liquidation.com's four warehouses.

Caskey emphasized sellers looking to acquire returns for resale read all the information in a listing, including the manifest, the condition and location, as well as looking at photos, to help determine the true value of the merchandise.

And it's not just large retail chains selling on Liquidation.com. Caskey said thousands of merchants of all sizes including mom and pops are liquidating their products - but be aware the opening bid on all Liquidation.com auctions is $100, so organize lots accordingly.


About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.


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