Could $800M Worth of Inventory be Returned in the Next 30 Days?

Despite a few technical glitches that forced customers to look at puppy pictures instead of discounted product, Amazon Prime Day was a resounding success. The retailer took in over $4 billion dollars worldwide, up from $2.41 billion in 2017. Prime Day has grown tremendously since it was first launched in 2015 — this year sales increased by 75%.

So what does this massive sales day mean for the other side of the supply chain — returns?

We don’t have exact figures for Amazon’s blended return rate, but let’s assume that it hovers around the industry average for ecommerce companies of about 20-30%. We think that Amazon’s return rate is lower than most other ecommerce companies for a few reasons:

  1. They invest heavily in product descriptions and customer reviews designed to set a clear expectation with consumers
  2. They sell many categories like books that traditionally have lower return rates
  3. Their large supply chain network provides them with a tighter grip over inventory planning.
  4. Amazon often allows consumers to keep items that they want to return if they are under a price threshold.

If sales do reach $4 billion dollars and we assume the low end with a 20% return rate, that means that nearly $800 million worth of inventory could be returned over the next 30 days.

And it’s not just Amazon.  Other retailers have started to take advantage of the momentum and create their own sales day. 54% of retailers had some sort of summer sale this week to compete with Amazon. Target’s Summer Sale was the highest single day of sales and online traffic so far this year.  All of those sales will also results in an uptick in returns.

So what should retailers take into account when preparing for the plethora of Prime Day-related returns?

  1. Make your return policy as customer-friendly as possible.
    • Customers are more loyal and engaged if there is a flexible returns policy. Our data shows that 71% of consumers said that a positive return experience greatly encourages them to shop at a store again and 46% percent of shoppers abandoned an online shopping cart because the retailer didn’t offer free shipping on returns. Retailers should offer customer friendly return policies, including free return shipping and a pre-printed label, if they want to compete and drive higher customer loyalty.
  2. Consider the inventory most likely to be returned.
    • A large portion of the inventory that is sold on Prime Day — both on Amazon and on other marketplaces — is consumer electronics. Consumer electronics depreciate in value faster than other inventory, and need to be restocked and listed quickly to recoup the most value. Retailers should ensure that they have a sophisticated test and grade functionality to inspect and relist inventory that is returned, as quickly as possible.
  3. Rely on a sophisticated Returns Optimization Platform (ROP) to disposition inventory.
    • Leading retailers are embracing ROPs as a new way to capture value by turning distressed inventory into additional recovery. Retailers should implement technology solutions to handle returns, instead of relying on manual, rule-based processes.

To learn more about how Optoro can help you optimize returns, download our new whitepaper.