Unlocking the Complexity: Navigating Returns Processing for Retail Success

Americans returned approximately $816 billion in products last year. For retailers, processing those returns is a costly endeavor. To navigate this dynamic and complex supply chain environment, the right returns management software solution is a critical factor for success. According to new data from goTRG, 34 percent of retailers say that they believe their business does a very poor to mediocre job with their returns process. However, there’s hope, as over 70 percent of retailers say they've invested in enhancing their reverse supply chain processes, with a majority investing between $1 million and $5 million dollars.

Retailers' Focus: Efficient Returns Processing Solutions

When looking at the enhancements that retailers deploy, most are turning to software to optimize existing inefficiencies, reduce financial waste, and ensure the highest net recovery for returns and excess inventory. A significant challenge retailers face in returns processing is the cost, which can accumulate to over 55 percent of an item's value. Excessive touches during transportation and handling contribute significantly to this cost. In fact, more than 50 percent of retailers say that their returns are touched more than six times before making their way back to the shelf.

To effectively handle heightened returns volumes and get inventory back on shelves quicker, retailers must implement better strategies to make informed, data-driven decisions and minimize these touches at scale.

Streamlining Returns Management With Intelligent Disposition

One way to mitigate this exposure is to apply intelligent disposition software that leverages data analytics and machine learning algorithms to automate and optimize the decision-making process for managing returned products. This technology can help retailers evaluate the condition, value and potential recovery options for each item, resulting in efficient and informed disposition decisions.

For example, if a customer decides to return a pack of markers, the intelligent disposition engine might recommend the customer to keep it because the cost to ship it back will be more expensive than the value of the markers. Or let’s say you were gifted a set of dishes that you already own. The disposition technology could identify that the store is running low on inventory and notify the salesclerk to restock the return instead of sending the dishes to a distribution center to be relisted online. Deploying this capability at the point of returns initiation, whether online or in-store, maximizes its effectiveness and efficiency in the returns management workflow.

Efficient In-Store Returns: Linking Systems for Optimization

Traditionally, in-store return rates were much lower than e-commerce return rates. However, for the first time, both in-store and e-commerce returns rates reached 16.5 percent in 2022. This is because many retailers have been encouraging consumers to bring their online returns to the store — and some retailers are even offering incentives to do so. It’s a smart strategy. Retailers that offered incentives to return online purchases in-store saw a 39 percent increase in purchase transactions. While this approach does help retailers avoid returns shipping costs, it can create other complexities.

One challenge retailers revealed is that they're unable to re-shelve over 50 percent of the returns that were purchased online and returned in-store. Instead, these returns are sent to a distribution center for processing, putting the costs back on the retailers to pay for outbound shipping. Retailers need to ensure they have the right returns management software in place that can help synchronize these disparate systems and identify which items are eligible to be restocked immediately so they can offer the customer the return option that yields the largest financial benefit.

Final Thoughts

Efficient returns processing is crucial for retailers to maintain profitability and customer satisfaction. To achieve this, retailers must have a robust returns management strategy that allows them to have the insights they need to optimize the reverse supply chain and minimize the number of touches and transports each item receives. Once this process is solidified, they'll able to balance customer satisfaction with cost considerations and effectively manage their returns while maintaining a profitable business.

Steve Rop is the chief operating officer of goTRG, the only company to deliver fully managed returns solutions for enterprise retailers and manufacturers, replacing costly delays, human error, and legacy systems with profit-driven solutions.