Sustainable returns management: the opportunities for (premium) brands

In the current e-commerce landscape, more and more brands are implementing a ‘new’ sales strategy. They offer their products directly to consumers through their online shop or an online marketplace. One of the many advantages, besides achieving higher margins, is that brands are in control of the sale of new products. But, it also comes with a significant challenge: the additional returns – an inseparable part of e-commerce. 

In this blog, we discuss the challenges and opportunities of returns management for (premium) brands and elaborate on the benefits that a sustainable solution can offer. 

Until recently, many brands were not or barely involved in the direct sale of products to end-consumers. The products were often sold to (r)e-tailers or distributors (B2B) who take care of the entire sales process – from selecting the right sales partners to procurement and distribution. The boost in e-commerce, partly due to Covid-19 and changes in consumer behavior and the new digital landscape we find ourselves in, has made many (premium) brands think twice. The shift from offline to online has accelerated e-commerce. To enjoy the benefits of this trend, more and more brands are choosing their own online B2C sales strategy.

Whether you decide to start your online shop or sell your products via an online marketplace, there are many things to consider when setting up an e-commerce strategy. Brands are forced to deal with inventory management, logistics processes, and customer service issues. Return management, often seen as ‘necessary evil,’ is no exception.

Where distributors or (r)e-tailers used to take the return process out of their hands, brands are now responsible for handling customer returns themselves. Since consumers cannot physically feel, touch, and try on the products, clear product information is essential to reduce returns in the first place. But when products are returned (and that is almost inevitable in e-commerce) – what do you do with them?

Returns management brings several challenges to any business focused on selling to consumers, such as:

• How do you categorize, evaluate and test returned products and ensure quality?
• How, where, and at what price do you reintroduce returned products to the market?
• Is the margin on sales of these products large enough to spend time and money on this and free up space in the warehouse?

For (premium) brands, there are two more specific challenges:

• What is the impact of selling damaged products on the brand image?
• To what extent does the offering of second-hand products come at the expense of sales of new products?

As a result, brands still choose solutions that do not provide the maximum benefit for their products. Returns are thrown away, offered to employees, given away or donated, or sold in bulk to buyers. By underpricing and over-discounting, companies miss out on opportunities. Because by repurposing returned products, brands can win over new consumer groups and contribute to a more sustainable world. Here’s how.

The (online) sale of returned and second-hand products is called “Re-commerce.” By using Re-commerce, premium brands can achieve two crucial strategic advantages:

• Attract new consumer groups. 

Offering returned products for sale makes it possible to attract new consumer groups that you are not addressing with your new items. Consumers who buy second-hand products do so mainly for sustainability reasons or budgetary constraints.

The green and sustainable character of returned goods appeal particularly to the younger Generation Z and millennials as sustainability is high on their list of priorities. But also, among other age groups, sustainability is an increasingly important criterion in the purchase process.

Consumers who cannot afford to buy brand-new products from a premium brand due to a restricted budget would generally opt for a B-brand or a cheaper alternative. Now, these consumers can purchase your products at an appropriate discount and gladly accept minor damage to the product.

• Build a sustainable brand image. 

By re-selling returned items, you build up a sustainable brand image. You show that you give something back to the world, contribute to the circular economy and reduce waste in e-commerce. A sustainable brand image attracts new consumers and is also very important for investors and journalists, customer satisfaction, and makes you more attractive for new employees. In a market where competition is fierce and increasingly more brands are starting to sell online, a positive brand image is more important than ever.

Returns management is an important part of an e-commerce strategy and offers significant opportunities for premium brands. The re-selling of returned products (Re-commerce) brings two significant benefits. Do you want to start with sustainable returns management? We first recommend evaluating internal business processes and getting recommendations from a returns specialist. A specialist can provide tailor-made advice for your premium brand and identify specific challenges. For example, it is not feasible for many companies to set up an efficient and scalable returns process themselves due to the complexity and lack of expertise, time, and resources. Outsourcing can then offer more advantages.

BuyBay is available for personal advice and is happy to make sustainable return management part of your e-commerce strategy. We always discuss your specific needs and wishes first and take over the entire returns process, if desired – from assessing and testing the returned products to reselling and fulfillment to customer service. Please feel free to contact us to discuss the possibilities.