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Black Friday & Holiday Season: Are you ready for the flood of returns?

Barely back from summer vacation, the e-commerce industry is already gearing up for the season with the highest turnover. The hot phase of the pre-Christmas period starts by Black Friday and the following Cyber Week at the latest. But while many vendors and retailers are preparing for rising demand and growing volumes of purchases, only a few have a strategy for dealing with the expected flood of returns during these seasonal sales peaks. We have compiled a checklist with 5 questions to help you check and optimize processes.

Last year, consumers in Germany spent around €3.7 billion on Black Friday and Cyber Monday. In the Netherlands, consumers spent €134 million on online purchases on Black Friday. According to a Salesforce analysis of data from one billion buyers, in 2020 global e-commerce sales grew by 36 percent year-on-year to $270 billion in the busiest week of the year around Black Friday and Cyber Monday. The Christmas business also increased significantly in 2020, and the global e-commerce market continues to experience an upward trend, not only due to the Covid situation. Hence, new order records can be expected for Q4 2021 – and that means a correspondingly high number of returns. This is especially the case as the return rate is relatively high when shopping for gifts, and also when limited campaign offerings encourage buyers to order first and then decide whether the product is the right one.

During this peak season, many companies already reach the limit of their capacities with the processing of sales requests. Therefore, nobody has time to focus on what is happening to the returns. Accordingly, in many businesses, the mountain of returns to be processed continues to grow until February. Overflowing warehouses are only the tip of the iceberg, however. Many vendors and retailers are not aware that inefficient returns management is wasting their sales and customer loyalty potential and putting a strain on their balance sheet. It is therefore advisable to check whether and how the returns management can be optimized before the peak season.

Checklist

  • Is your returns management scalable?

Is there sufficient personnel available to cope with the foreseeable flood of returns? Additional seasonal employees are often used in sales. Can this also be implemented for returns management – including the necessary workspaces, equipment, and training for all included processes? In addition to goods receipt and sorting, effective returns management also includes a quality check (“grading”) of the goods and the assessment of which further steps they should go through: cleaning, repairs, data deletion, selection of the resale channel, and pricing. For the sale of the returned goods, detailed documentation of the condition of the products and any defects are necessary.

 

  • How is the off-sale of the returns handled?

Many companies that cannot handle returns management internally leave the returns to logistics service providers. While the means the process is outsourced, it is usually also a big loss-making business. Logistics service providers often sell returns unsorted, on mixed pallets, and as “C-goods” to bulk buyers. This way, the products are often sold for less than 10 percent of their original value and in some cases, products are even destroyed. This has recently fallen into disrepute concerning the lack of sustainability and could even become illegal for some product groups in certain regions (e.g. with the ElektroG3 law in Germany). Reselling the individually processed products or groups of products is far more economical and sustainable if the most suitable sales channels are selected – such as marketplaces, auction platforms or shops, or website areas for returned goods and overstock.
Can your resale processes be adapted or outsourced accordingly?

 

  • How is the status of your warehouse capacities and resale cycles?

The warehouses of many vendors are nearly bursting at the seams after the Christmas season. Due to a lack of time, the returns often pile up until February, as there was no time for targeted processing during the peak season. The cost of additional storage capacity however is only one disadvantage of slow returns processing. The loss in value for the goods increases rapidly the longer it takes to sell them off again. If, for example, a new product version is released, or if seasonal goods have to be stored until the next year, the value decreases dramatically. Check whether a process modernization or outsourcing is worthwhile.

 

  • Do you utilize customer communications for a positive effect?

The best way to reduce returns is of course to lower the return rate. Do the tight order time-frames of your promotional deals encourage careless ordering and thus more returns? A realistic representation of the products, detailed product information, 360-degree images, instruction videos, and customer reviews can help to reduce the return rate. However, in the age of faster ordering and easier return options, returns cannot be completely avoided. When selling-off returns, a detailed presentation of the product condition is even more important than for brand-new goods. Good customer service is also particularly important here because customers often have questions before buying returned goods. However, if the product presentation and support ensure a positive shopping experience, then additional customer groups can be won through the sale of returns or overstock. Sustainable handling of the goods can also be used to position your company positively with customers who pay more and more attention to sustainability factors.

 

  • Do you utilize returns management software or do you work with a specialized partner?

As part of the cooperation with a partner for returns management or as part of a special “in-house” solution, software with AI functions ideally supports the returns processing as soon as the return reaches the warehouse. Based on pre-defined criteria, it automatically decides which sales option will bring the highest revenue and starts sorting the goods. The use of intelligent software in-house or provided by partners is also worthwhile for the determination of the pricing for the returns’ off-selling. An intelligent software solution can monitor the market prices for hundreds of thousands of products. When working with a returns specialist, additional data from product search queries and other data sources is also used to update prices several times a day. This way, the items can be sold at the best possible price in a relatively short time. A specialized returns partner can also take over customer service for the returns. The necessary transparency can be provided via a dashboard that allows an overview of the respective goods and their status at all times.

Conclusion

The use of intelligent AI-based technologies for automated processes opens up new possibilities with which returns and return costs can be drastically reduced. When working with a specialized partner, the return on returns is substantially higher than when selling to bulk buyers via traditional channels. In addition, companies can concentrate fully on their core business and do not have to waste energy by negotiating prices with buyers.

Another advantage is the sustainability of this approach. This is becoming even more important, as recent studies show, sustainable use of resources is becoming an increasingly important criterion for consumers when choosing a brand or a retailer.

 

Do you have a question or would you like personal advice? Contact us without any obligations. We are happy to help!

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