What do retailers do with returns

Retailers are struggling with that middle ground. But the middle ground is causing a lot of problems. Knowledge Wharton: There are companies that have built returns into their business models, such as Zappos.

You can order three or four different sizes of shoes, and they expect you to return them. How does that kind of model, and also just the general ease of returns, impact supply chains? Robertson: Again, this is part of the developing consumer behavior. We may be training consumers to return. I think they let you order five pairs of frames, and you buy one and return the rest.

As a consumer, if you come to expect this, then retailers have to respond. And more and more, they may have to move in this kind of direction. Knowledge Wharton: Does it affect inventory when stores need to have an enormous number of sizes or styles to send out, and then most of that comes back? Robertson: Supply chains work very well going forward.

And part of that is the supply chain is too long. Can you put it in the inventory, or do you have to go to off-price retailing or sell it to an intermediary? Forward is great. And again, there are new companies appearing in this middle ground to handle backward supply chains. If it is fair and equitable and consistent, that may very much be to your benefit. Robertson: Your return policy helps define you as a retailer.

If consumers perceive it to be unfair or inconsistent, that may be damaging to your reputation. Another potential damage is in the area of sustainability. Retailers, particularly in the fashion and clothing area, have tended to dump unused merchandise to some extent.

Some of it goes to off-price channels and so forth. And some of it gets dumped into landfills. There are statistics around how many tons of clothing wind up in landfills per month, and that is a concern for many of us who are worried about sustainability. If they take things back, what do they do with them? For luxury brands, what do you do? For a while, there was burning going on. Knowledge Wharton: What would you say are the most critical areas for research so that brands can better understand how to set policies and manage returns?

What should they be looking at? Robertson: Yes, this has been a neglected area. As I said, retailers tended to ignore industry trends and just treat returns as an irritant. Manufacturers and retailers are increasingly collaborating to establish the most effective reverse logistics processes.

This collaboration includes addressing issues such as the handoff location, what and where value-added processes should occur, what liabilities exist and how to address them, and ensuring sustainability and compliance.

Retailers are also looking at their logistics networks holistically, considering forward and reverse operations together. That has helped to reduce return rates. But driving returns prevention back to product design is still not as common as it should be, and represents an opportunity for improvement. In consumer electronics, for example, about 65 percent of goods are returned with no fault found; often consumers didn't understand the product. Greve sees opportunity for manufacturers to offer technical support call centers to help prevent returns.

So when fuel prices rose in , it didn't pay to move some low-priced goods back to a centralized DC. It starts with procurement—or better yet, design.

Collecting details on each material used in a product enables the reverse logistics function to predetermine how it should be handled upon return, speeding the process and increasing the potential revenue. Pertinent data goes beyond information about the item returned.

By combining that information with audits of supply chain, point-of-sale, and other data, retailers can pinpoint the root causes of unsaleables—such as issues with customer sentiment, forecasting, replenishment forecasting, product damage, and shelf rotation—then work with manufacturers to address the problems.

That's the big opportunity. Access to data at the point of return also provides a frontline barrier against fraud. Retail associates use receipt data to verify purchase, but can also look up serial numbers and check against third-party databases of consumers with high return rates.

Visibility into the movement of returns helps retailers adjust operations according to need. Customer relationships are paramount at Soft Surroundings; the CEO often directly responds to customer comments.

So if the reverse logistics staff can see a return en route, they can expedite a refund or replacement, and delight the customer. Analyzing what gets returned and why helps retailers identify patterns that can shape product design and selection.

Retailers are also able to get a better overview of reverse operations. That type of information is available more immediately than it was in the past, so Target can plan productivity around returns demand, and make network adjustments quickly. As customer expectations grow higher and competition fiercer, retailers are seeking to simultaneously cut costs and enhance the customer experience. Over the past decade, many have embraced forward logistics as a tool for achieving both goals.

Now they're turning their attention to similar opportunities in reverse logistics, both to address customer centricity, omni-channel operations, and regulation, and to extract more value from their returned goods. That increased focus is working. By collaborating, retailers and manufacturers have cut return rates by 50 percent and more, according to Inmar's Dollase. Phillips Close Erica E. Phillips wsj.

Final Discount Retailers are sending more merchandise to the secondary market as online shopping increases returns. Secondary retail sales, VIEW Photos. Related Videeo. More on Retail L. Show Conversation Hide Conversation Sponsored Offers.

Most Popular News. Best Buy uses a number of methods to minimize the cost of returns, including selling open box items on its website and hosting a sales event for open box merchandise right after Christmas. The retailer also has a small number of Best Buy Outlets where open box and slightly damaged major appliances are sold.

B-Stock builds individual online marketplaces for retailers or brands to sell returned, liquidated or excess merchandise in bulk quantities to certified resellers. Moriarty said the volume of inventory sold on its site grew percent from to Penney , among others.

While B-Stock offers the option for warehouse storage of merchandise at CH Robinson warehouses throughout the country, B-Stock never takes financial ownership nor logistics control of the inventory being resold. Retailers can restrict where a reseller can sell items.

For example, they can require resellers to export the merchandise. Moriarty said much of the inventory is resold on Amazon, eBay or in other small local stores. Optoro sells software platforms to retailers and brands that identify the best option for maximizing the value or lowering the cost of returned items on a case-by-case basis. Options could include restocking, refurbishing, liquidating, donating or recycling. Optoro also has its own liquidation channels, Blinq.

If it is items that are not going back in stock, we can double or triple the recovery in some cases," Moore said. Happy Returns offers technologies and logistics at nearly U.

Direct-to-consumer brand start-ups like Everlane, Untuckit and Rothy's work with Happy Returns, which has put its so-called return bars in malls, on college campuses and even stores like Sur La Table and Paper Source.