How can retailers prepare for New Year returns?
The holiday season will mark a huge boost in revenue for most retailers: holiday sales can account for as much as 30 percent of total annual revenue. But on the heels of the biggest shopping season of the year, comes a rush of returned merchandise that will end up significantly cutting into the bottom line.
This season in particular will bring higher return rates as more European consumers than ever are expected to participate in cross-border ecommerce (ecommerce return rates are double that of brick and mortar stores and vary depending on the country’s return culture). Relaxed return policies, buyer’s remorse, and gift-recipient dislike will also contribute to the problem.
Whether a problematic consumer electronic, an ugly sweater or unwanted toaster oven, one in three purchases over the Christmas period will be returned. Though much of it will be in functionally and cosmetically perfect condition, 95 percent of it will be slated for the secondary market. This presents a challenge for many retailers who will need to radically rethink their remarketing strategy in 2017 in order to offset as much loss for this merchandise as possible. Here is where having a proper solution in place to combat “return rage” can make a major difference.
Smart Reverse Logistics
Rather than treating liquidation as a reactive event, retailers should think about approaching it as a long-term strategic asset, in the form of a solution that is automated, sustainable and scalable. For example, the solution should be able to handle the uptick in returned inventory following the holidays without sacrificing the recovery or velocity with which it is sold.
The most effective solution comes in the form of a web-based platform. This type of solution allows thousands of secondary market buyers to compete for the stock, pushing prices up (versus a broker negotiating them down). In every major city around Europe (and the globe for that matter) there is a robust secondary market of businesses that purchases excess and returned inventory for resale; the secret to success is the ability to gain access to this buyer base. An online B2B auction marketplace solution is one way to make this happen. By using the familiar eBay-style online auction platform, retailers are able to list their merchandise for sale directly to this global audience of buyers, essentially cutting out the traditional liquidator ‘middle-man’. Many of the world’s top retailers, including the world’s largest retailer and e-retailer are using this type of web-based B2B auction approach and offsetting substantial loss for returned and excess stock.
Do your Homework
When selecting an auction platform or online marketplace provider, retailers should do their homework. There are a lot of choices out there and not all are created equal. The best ones will:
- Provide immediate access to a large group of interested, vetted buyers, authorized by the retailer
- Create customized demand generation campaigns for and auction lots
- Encourage competition and keep buyers engaged
- Allow the retailer to sell from multiple locations, reducing the need to consolidate inventory and eliminating extra transportation costs
- Collect data on each transaction with analysis on how to improve recovery
Everyone’s A Winner
A smarter approach to customer returns, particularly those slated for liquidation will provide long-term benefits not only to retailers, but to secondary market buyers as well. Retailers can quickly shift unwanted stock from the warehouse and recoup cash back into the business, whilst the secondary market gains access to better quality stock for resale. It’s a win-win.
In today’s retail landscape returns are inevitable, especially after December 25 when a holiday hangover sets in and people regret their purchases or dislike their gifts. Facing these returns head on with a web-based program that automates the process is imperative and should not be left to old, reactive approaches. What’s more it can mean the difference between winning and losing this holiday season.
Ben Whitaker is Director EMEA of B-Stock Solutions, a technology-enabled company powering the largest network of private-label B2B liquidation marketplaces.