Retail growth has been on a roaring upswing since the dawn of e-commerce. The effect of which, as retail inventory experts know, is that each year e-commerce grows, the returns problem grows as well.
We saw the best example of this throughout the pandemic, as people were locked down at home; e-commerce marketplaces saw a boom in business as people turned away from bricks-and-mortar to online shopping. Along with it came yet more returns.
Before COVID, retail saw 3.5% growth in 2019, jumping up to 7.6% in 2020, and 14.4% in 2021, dropping back to 7% in 2022 as the worst effects of the pandemic waned. During that time, returns grew too; the more people shopped online, the more items they had to return. The rate of returns in 2019 stood at 8.1%, spiking to a high in 2022 of 16.5% of sales, or $816 billion.
As those figures drop from their pandemic highs, the shopping habit to order and send back remains elevated, costing retailers $743 billion in returned merchandise in 2023.
Growing Demand for Returned Goods
Unique factors are shaping consumer behavior as the economy and environment drive more everyday spending decisions in American households. Economic uncertainty is eroding consumer confidence as inflation drags on, prompting many to look for ways to save money. On top of this, climate change is shaping the situation, too, with a large contingent of shoppers seeking more sustainable options.
These latest trends in retail growth reveal the solution retailers and brands have long chased, made more attainable in an age when there is high consumer demand for returned merchandise — which is translating to higher business demand by buyers and sellers.
Maximizing Value Recovery in Returns
Retailers dealing with an influx of returns may find themselves hemorrhaging profits and paying more for warehouse storage. In order to recover maximum value, having a velocity-centric strategy, the moving of returned goods through their system quickly and efficiently, is at the core of success. The faster the item is put back on “store shelves,” the less value is lost. Keep in mind, some retailers may find it more cost-effective to offload returns to resellers rather than invest in inspecting, sorting and reshelving.
Here are a few ideas businesses may consider for an effective returns strategy:
Buyer Strategy: Establish relationships with high-volume buyers to ensure inventory is moving out of warehouses in as few as five days and have backup partners in mind to pivot in case there’s a change in an established relationship.
Returns Policies: Offset costs by implementing new return policies, but be mindful this can deter customers. Other initiatives include making returns easier, like convenient drop-off locations and “keep it” refund policies.
Leverage Data: Analyze data to identify and track recurrent issues with returns, using insights to tackle issues at the product and point of purchase level, decreasing the chances of the same product being returned repeatedly for a simple, fixable reason.
Adopt Automation: Precise sorting and inspection of returned merchandise can be achieved with return processing systems, streamlining the decision-making process as to whether or not a product is suitable for resale or needs repairs.
Optimize Liquidation: Cut down on the time it takes to manually process and audit excess inventory. A liquidation strategy leveraging recommerce can mitigate the required time, quickly auditing what gets remarketed, donated, recycled, destroyed or liquidated.
Partner Up: Having a strong partner in reverse logistics, like B-Stock, can help in nearly all the above areas. An expert partner can empower a retailer to more quickly locate qualified secondary market buyers while also improving overall value recovery of returns and excess goods.
The bottom line is to move out returned goods at faster speeds so that inventory never piles up in the warehouse. Data and predictive analytics can help achieve a more proactive approach when planning, keeping inbound and outbound returns moving through the system quickly and efficiently.
As the problem of returns continues to impact retail, the good news is that the time is right as the demand for returned goods is growing, especially from business buyers/resellers who see the value in returns as quality inventory for their customers. There’s never been a better time for retailers to make sure their returns operations are optimized in a way that allows for the strongest value recovery possible.
Marcus Shen is the CEO at B-Stock Solutions, the world’s largest B2B marketplace for excess merchandise. His 15-plus years of executive and investor expertise in the internet and software industries has brought phenomenal growth to B-Stock Solutions. Since he joined B-Stock Solutions in 2019, the company’s buyer base has grown incredibly to more than 325,000 bids per month, which is an increase of 64.8% since 2019. B-Stock is proud to claim that 9 of the top 10 USA retailers and manufacturers now use B-Stock to list and sell their overstock and returned merchandise.
Boasting a skillset in SaaS, e-commerce, operations, SMB, private equity, M&A and corporate finance, Shen is leading the B-Stock team to build an innovative solution which leverages data and technology to re-imagine the traditional liquidation industry. This new approach is an effective way for businesses to recover some value from surplus inventory and free up warehouse space as well as increasing their recovery rates without the hassle of finding a buyer.
