While warehouse optimization is important year-round, it’s absolutely necessary for making the post-holiday return frenzy more manageable. Specifically, it's a key step in helping brands and retailers minimize losses during January and February. Overall, unsold inventory costs U.S. retailers a total of $224 billion annually according to the National Retail Federation (NRF)—but warehouse operations teams and returns processing systems truly need to be at the top of their game during these first weeks of the new year.
Given that Americans are projected to spend $957.3 billion this holiday season, unwanted gift returns will surely be rolling back into warehouses by the truckload, adding to the other merchandise that was never sold in the first place. Our data shows that of all retail categories, Apparel & Footwear is the largest contributor to these customer returns, followed by Home & Garden, Toys and Consumer Electronics.
Despite new strategies designed to limit return rates—including “returnless” or “keep it” refund policies—this is still an issue for businesses. So, what can they do to alleviate this problem?
Consider Space and Influx in Post-Holiday Returns
Trying to accommodate all of this returned inventory can easily create a crunch for warehouse space. If your business primarily deals with small items like cell phone accessories or jewelry, warehouse inventory management is a little easier. Since these products don’t take up too much space and offer decent margins, it may be okay to hang on to them for a while even if they’re not moving as quickly as you’d like.
On the other hand, if you sell large appliances, furniture or other bulky home goods, it’s very important to keep products moving steadily through your warehouse. This type of stock does more than just take up space—it also carries an opportunity cost. Every dollar tied up in stagnant inventory is one that can’t be put toward developing, manufacturing, marketing, and distributing new high-profit items. It can also create a crowded, and possibly dangerous workplace for the warehouse staff, slowing down operations and creating liability.
Automate & Analyze Your Returns Process
In recent years, leading brands and retailers have increased their investments in technologies like artificial intelligence, machine learning and advanced data analytics that can enhance the efficiency of return processing.
Automation and data analysis during in return processing systems offers several advantages. It enables quicker and more accurate verification of returned items. It also streamlines decision-making on whether a product can be resold or requires repairs. Of course, it also reduces errors in manual processes formerly performed by humans. Finally, identifying key trends in returns data early on can help expedite the post-holiday returns process and contribute to faster refunds or exchanges, improving overall customer satisfaction.
Enlist Third-Party Specialty Services
3PL solutions can help perform basic supply chain functions, helping to streamline or even manage processes for lotting, cross-docking and securing preferred rates with shipping carriers.
Cross-docking in particular decreases handling and storage time while freeing up precious warehouse space. Partnering with 3PL experts also ensures broader geographic coverage, so a warehouse or distribution center experiencing seasonal or sporadic inventory fluctuations doesn’t find itself in a pinch, unable to handle the massive volume with its own in-house resources.
Optimize for Velocity
Velocity while managing surplus inventory is key for two reasons: First, slow-moving inventory racks up carrying and opportunity costs. Further, the value of the goods themselves actually degrades over time, as certain products become obsolete or fall out of fashion. Working with a reverse logistics partner that can connect retailers with many buyers around the world enables your organization to strategically sell excess goods into the secondary market faster than it would through in-house methods.
Strive for Predictability Too
While surplus is a challenge, retailers and manufacturers should view business buyers’ unending demand for excess stock as an opportunity to guarantee significant warehouse space cleared regularly and quickly.
The ideal reverse logistics partner will not only link you up with buyers and shoulder some of the logistical burdens of excess inventory sales—they’ll even help your organization secure guaranteed pricing on its most common surplus through a suite of different sales models including time-bound contracts. Such solutions create a win-win scenario for both high-volume buyers and retailers looking to lock in healthy recovery rates while still maintaining velocity in their recommerce processes.
Even better is a partner that can offer a combination of several different sales models to account for the many inventory problems modern businesses face: seasonal inventory surges, regular repeat overstock and even the odd one-off lot. The ability to mix and match solutions to prioritize recovery, speed, space, or ease of use on an as-needed basis should not be underestimated.
Trust the Experts When Building a Complete Recommerce Strategy
As we see the shopping season wind down, returns will certainly ramp up. Retailers who haven’t already done so should consider automated systems for returns processing to improve speed and accuracy and keep updated inventory levels in real-time as items are returned.
Warehouse operators should be proactive in implementing clear strategies for managing unsold or returned items, such as discounting or selling goods at high volumes to qualified buyers. While donating or recycling is always an option for minimizing waste, it requires oversight and comes with its own set of costs.
The best solution, however, is to implement a reverse logistics strategy in which a dedicated partner gives you access to worldwide demand, delivers efficiency-minded features, and enables data-backed decision-making to help boost both recovery and velocity.
A resilient, comprehensive optimization strategy will keep warehouses running smoothly and help to achieve a healthier bottom line—both during the post-holiday months and all year long.