The last holiday season witnessed an inventory glut stemming from pandemic shutdowns, raising concerns about a repeat of these events among brands. In fact, unsold inventory increased by 12%, from $662 billion to $740 billion in 2022. Many retailers are resorting to heavy discounts to clear unsold inventory and free up warehouse space.
One area that’s set to add further challenges to this already complex supply chain problem is returns – a problem expected to cost $627.34 billion this year for retailers. Last year, retailers saw a 57% jump in holiday shopping returns. The majority of these returned items can’t be resold and are ultimately sent to landfills.
By developing a proactive returns management strategy, retailers can reduce the impact of holiday returns to their supply chains and lower the cost of reverse logistics.
Building a Smart Returns Strategy
Leveraging technology to help you build a highly automated returns management experience that’s seamless for your customers and your team to navigate can help you reduce supply chain disruptions.
Automating your returns workflow will help you save time on customer support while helping customers find solutions faster. You can use conditional logic to determine whether customers should ship back their returned items, based on the items’ condition, resale value, and shipping/restocking costs.
If the return isn’t likely to be profitable for your brand, you can offer the customer a “returnless refund” in which they’re permitted to keep or donate the items – eliminating the waste associated with reverse logistics for products that would otherwise be bound for landfills. Alternatively, you can route the returns to a third-party reseller, a liquidation service, or a recycling plant.
For items that you intend to resell, your returns management platform can sync with your inventory management and logistics tools to automatically route the items back to warehouses that have limited stock. Your reverse logistics route can be calculated based on criteria you set – whether that’s a faster shipping time or a lower cost, the returned items can be matched to the right carrier and routes based on your priorities.
Returns management technology can also help you facilitate exchanges, which will enable you to retain revenue from the transaction that would otherwise be lost. By using a returns management platform that enables customers to apply their store credit immediately to a variant exchange or a new item, you’ll eliminate the friction from the process, encouraging shoppers to give your brand another try.
Minimizing Returns this Holiday Season
Optimizing the returns process can help you reduce waste and boost customer retention – but it’s equally important to prioritize strategies for lowering your return rate in the first place.
Here are a few ways to do that:
- Use insights from your customer reviews and returns data to improve your product description pages. Pay close attention to customer feedback in both reviews and customer support inquiries, particularly on items that have a higher-than-average return rate. Are items being returned because they don’t fit properly, or the color is different than it appears in your photography? If so, it’s important to optimize your product descriptions with details to help customers get a more accurate picture of the product: For instance, include a “shoppers say this item runs a size small” notice on swimwear that’s frequently being returned due to a poor fit. If customers say a rug’s color is different than it appears in photos, invest in new product photography, and encourage customers to submit user-generated content like photos and videos to showcase how the item looks in the real world.
- Incorporate augmented reality to help customers “see” the items in their space. Particularly if you’re selling items such as furniture or home decor via ecommerce, customers often aren’t sure whether they like an item until they can visualize it in their own space. By incorporating AR tools into your brand’s mobile app, you can give customers the ability to virtually display your products within their own environment, providing them with more confidence that the products will fit their space. Investing in AR can significantly reduce your ecommerce return rate: Shopify reported a 5% reduction in returns and an increase by 40% in conversion from brands that used AR technology.
- Curate personalized customer recommendations based on behavioral and first-party data. Encourage your customers to fill out user profiles with information that will help you provide better recommendations for them – if you’re a skincare company, does the customer have oily, dry, or combination skin? How old are they? Use this profile information along with data showing their browsing, purchase, and return history to continually optimize your product recommendations and showcase relevant products that they’re likely to love.
- Focus on customer education and troubleshooting. If customers can’t immediately get the hang of how to assemble or use a product, they’re more likely to return it. Build out videos and other marketing assets that showcase how to set up your products, common use cases, and troubleshooting tips. Provide access to a knowledge hub that answers all of your customers’ most common questions and ensure that customers have quick access to customer support if they still have lingering questions about their purchases. By automating the returns process and providing on-tap answers to general questions, you’ll have the resources to reserve your customer support team to support specialized inquiries that can help customers feel more comfortable with their purchases.
Optimizing Your Supply Chain Through the Entire Customer Journey
As a retailer, it’s important to remember that the customer journey doesn’t always end at the point of purchase. Particularly during peak season, retailers are likely to see a high volume of returns, with 17.9% of goods purchased during the holiday shopping season estimated to be returned last year.
To keep your supply chain healthy, make sure that you have plans in place for sustainably dealing with your returned merchandise. Leverage technology tools that can give you visibility into your inventory levels, both across warehouses and through the returns process, so that you’ll have the insights you need to help you make smart purchasing and sales decisions. Using tools with conditional logic to help you weigh up the value of returning merchandise against other disposal options will help you avoid unnecessary reverse logistics expenses.
By ensuring that you have transparency through the entire supply chain, you’ll be equipped to stay agile and make smarter decisions about inventory stocking, pricing and restocking – helping you grow a sustainable business through this holiday season and beyond.
