With many retailers and brands offering flexible return policies, modern consumers can freely make purchases without the risk of being stuck with unwanted goods. But the flexibility of these policies is affecting return rates that cause complex problems for retailers. In the US alone, 10% of all goods purchased are returned, but this number can be as high as 30% for eCommerce merchants. This equates to $260B worth of returned goods annually – a staggering figure that retailers are struggling to grapple with. But what actually happens to products once they’re returned? That depends on how the retailer is managing their reverse logistics.
Traditional Liquidation Process
In order to get these goods off their hands as quickly as possible, retailers often turn to liquidation – an antiquated and inefficient practice – that returns only 10-20% of the total cost of goods to the retailers.
In a liquidation scenario, a returned product will typically wait in the back of a warehouse or stockroom until there is a critical mass of enough product to ship off to a distribution center. From there, the product will often cycle through up to four more sortation hubs or distribution centers until the goods are finally resold to a secondary consumer; often a reseller. Along the way, goods risk damage from being handled up to five different times, as well as obsolescence, since this process can take up to six months to complete. The traditional liquidation process is both financially and environmentally wasteful, and is not a sustainable model for a scaling eCommerce economy.
Technology-Enabled Returns Management
If a retailer has a technology solution in place, their goods should be managed at the first touch and scanned into a sophisticated system that automates the process of getting a product to its next best home as quickly and efficiently as possible. Cutting down on transportation waste, labor costs, and reducing the total process time can often help retailers gain back up to 70% of the wholesale cost of goods.
With consumer demands continuing to rise, retailers will be best suited to handle returns volume at scale with a first-touch solution in place, allowing them to earn back financial value as quickly as possible.
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