Retailers are realizing things need to change to improve profitability amid dwindling consumer demand and rising costs. Predicted 2024 trends can be grouped into three categories: return policy changes, reverse logistics strategy changes, and aligning with modern technologies to manage their surplus in inventory to achieve maintained velocity and strengthen profitability.
As returns persist, the cost to process them continues to rise. Processing a return can cost retailers as much as 39% of the original price, according to a 2023 report from logistics technology company Optoro. We’ve observed retailers demanding a better way to manage returns and surplus inventory while e-commerce purchases continue to rise, resulting in customer-centric returns policies racking up into the millions, with retailers footing the bill.
It's no surprise that retailers and manufacturers who adapt to technological advancements can improve not only their customer experience, but also mitigate the pains of returns and warehouse storage costs. Here are some observed trends we’re bound to see more of in 2024:
● Augmented reality ‘virtual try on’ features emulate a fun “try before you buy” experience online. Retailers such as Warby Parker and Zenni have shown success with this method. However, the accuracy is often debated and the set-up is time consuming and costly.
● AI chat experiences, which are smart enough to feel like live chat, have helped customers who are debating on a size choice or have questions before making their purchase. However, it should be noted that the added guidance gives the consumer confidence in the purchase and has reduced – but not eliminated – returns.
● Leveraging supply chain data analytics and customer-centric initiatives can create a seamless and eco-friendly returns experience that reduces waste and minimizes the environmental impact. However, many businesses don’t have the infrastructure to lean on data to the degree needed and often have to seek a third-party provider to support their initiatives.
Trends in Supply Chain and Reverse Logistics
Maintaining velocity while managing surplus inventory is key for two reasons:
- Slow-moving inventory racks up carrying and opportunity costs.
- The value of the goods themselves actually degrades over time, as certain products become obsolete or fall out of fashion.
Retailers hosting outdated traditional liquidation strategies may find that sourcing the right buyers for their merchandise and managing overflowing warehouses is costly, slow and inefficient. A newer approach to recommerce relies heavily on reverse logistics and supply chain executives aligning with smarter solutions and partnerships to recover more value out of their returned, overstock, and damaged goods.
● Investing in an automated returns process can be an efficient and more accurate way of dealing with warehouse and DC processing of returns.
● Implementing a recommerce strategy can be the right solution for retailers seeing a decline in velocity and recovery from returns and overstock. Those who don’t have the capabilities internally to rectify their challenges and need to align with strategic partners that offer the innovative technology solutions that can help your business maintain velocity while managing surplus Inventory.
● Working with a reverse logistics partner can connect retailers with many buyers around the world and enables your organization to strategically sell excess goods into the secondary market faster than it could through in-house methods.
● Restocking fees are quickly becoming more commonplace among some of the biggest names in retail like Zara, H&M, Dillards, and J. Crew. It’s reported that about 40% of retailers are charging return fees this year, according to retail technology company Narvar.
● “Returnless” or “Keep It” Refund Policies
○ Retailers like Amazon and Walmart will occasionally let a customer keep their refunded item instead of making them ship it back.
○ The costs associated with fuel, processing, reshelving, and warehouse storage space to take it back is more expensive than just letting customers keep the item.
● Shortened Returns Periods
○ Long gone are the days of extended returns period from the pandemic, and it’s common to see return windows drop from 60 days to 30 days or 14 days (mail or in-store).
○ For consumers, this shortens the window of opportunity to make a return, and ideally, creates a more intentional purchasing decision altogether.
○ For retailers, adjustments to return policies are in an effort to reduce an unsustainable amount of returns. However, it should be noted that making your items harder to return can create a larger barrier of confidence to your consumer making the final decision to buy.
Understanding Returns Policies Empowers Consumers to Make Informed Decisions When Purchasing
It’s commonly known that 20% of online purchases are returned. Knowing that retailers are tightening up return policies, consumers will have to adjust their shopping habits or risk fees taken out of their refund. That means combating buyer’s remorse – or the regret associated with a purchase that may not have been necessary – and bracketing – the practice of buying multiple sizes and sending back the ones that don’t fit.
Yet, shoppers still want flexibility in their purchasing. If return policies are too strict, they will abandon their purchase altogether. Happy Returns reported that 50% of shoppers fell into this category. A cumbersome or inconvenient returns policy can be the difference between a sale or dealing with the possibility of an item getting sent back to the merchant.
There is still hope for retailers navigating these dicey waters. An efficient and transparent returns policy can actually lead consumers to revisit brands for future purchases. Brands would do well to focus on this aspect before enacting any policy changes and see it as an opportunity to strengthen their brand’s reputation in creating positive returns experiences.
The eco-conscious consumer may see return policies changing as a step in the right direction for companies to lower their carbon footprints. The use of natural resources associated with manufacturing and overproduction is one thing – but the rampant rate of returns and its adverse effects on the environment is only aggravating the issue. There is a growing number of millennials and Gen Zers who share the same environmental concerns. Returned inventory in the US produced 9.5 billion pounds of landfill waste, according to Optoro.
The Reimagined Returns Process
By leveraging smart technologies, data analytics, and customer-centric initiatives, businesses can create a seamless and eco-friendly returns experience that reduces waste and minimizes the environmental impact. Modern recommerce strategies go beyond traditional liquidation solutions and have been growing in popularity due to the alignment with secondary market buyers and speed of offloading overstock resulting in an improved recovery rate for returned items and reduced warehouse storage costs.
What businesses choose to do with their returns can ultimately become the divide between growth velocity and financial hemorrhaging of the business. With such a heavy decision in the balance, it often is wise to align with support from expert sources when making recommerce and reverse logistics decisions.
Marcus Shen is CEO, B-Stock Solutions, the world's largest B2B marketplace for excess merchandise. B-Stock helps retailers and manufacturers achieve a healthier bottom line through an online B2B marketplace and managed services that deliver demand, efficiency, and insight to clients’ re-commerce operations.
This article originally appeared in the January/February, 2024 issue of PARCEL.
