Now add to that glut another category of products that stores have to deal with: returns.
So instead of piling returned merchandise on this growing pile of inventory, stores are just thinking about handing customers their money and letting them hang on to the things they don’t want.
“It’s going to be a smart strategic initiative,” said Bert Fleckinger, retail expert and managing director of consulting firm Strategy Resources Group. “Retailers are stuck in excess inventory of unprecedented levels. They can’t afford to get more of it back.”
He said that returned products are handled in several different ways. Retailers take back merchandise from the customer, evaluate them and, if in good condition, put them back on the shelf at the same or lower price.
“Given the situation in the ports and the lack of containers, sending the product abroad is not a real option,” Flickinger said. Finally, retailers can hire outside companies to handle all aspects of merchandise returns for them.
However, he said each of those options addresses additional costs for retailers.
“For every dollar in sales, the retailer’s net profit is between a cent to five cents. With returns, for every dollar in merchandise returned, it costs a retailer between 15 cents to 30 cents to handle,” Flickinger said.
There’s one more option for retailers to process returns while avoiding more product bloat, and that’s to consider “no-yield,” said Steve Robb, chief operating officer of goTRG, a company that processes more than 100 million items that are returned annually to companies like Wal. Mart, Amazon, and Lowe’s.
Just keep it
Rob said his company’s customers are 100% considering offering a “keep it” revenue option this year, though he didn’t reveal whether any of his customers have implemented a “keep it” return policy yet.
In some cases, when they decide it would be easier, some retailers advise customers to keep or donate their return after issuing a refund. Walmart said it has nothing to share at this time. Lowe’s has no comment for the story.
“They really do discount in stores to get rid of products, but when there are big discounts, buyer’s remorse goes up. And people tend to buy a lot to take back later,” he said.
Rob said that refunding customers while still allowing them to keep their revenue is not a new practice. “I started with Amazon several years ago,” he said.
Offer makes sense for some types of products – bulky, low-priced items such as furniture, kitchenware, home décor, baby chairs, walkers, and strollers where it would be expensive for the retailer to cover return shipping.
“Other products such as toys, shoes, towels and bedding raise health concerns when it comes to revenue. It could also apply to these categories,” he said.
Another concern is with cheaper items: Stores usually discount returns, so the amount of money they can make on a cheap return is minimal — and it might not be worth the barter, says Keith Daniels, partner with Carl Marks Advisors.
However, the “keep it” policy has its own drawbacks, namely: companies will need to ensure that they do not fall victim to fraud.
“One thing retailers need to track and ensure is that customers become aware of [Keep it] The policy does not begin to be abused, with the pursuit of free goods through a series of orders by means of refunds while keeping the goods.”
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