Analysis

Ecommerce returns are at an all-time high. What’s your plan?

The explosion of ecommerce is bringing with it a subsequent spike in returned merchandise: online return rates are more than double that of brick and mortar with up to 30% of purchases sent back. Buyer’s remorse stemming from the consumer not being able to touch or try on the product plays a large role, as does the propensity for a customer to order two or three sizes or styles of the same product and send back the ones that don’t work. No matter the reason for return, this trend is costing retailers billions and that is a pretty big dollar amount that can’t be ignored.

Though much of the returned merchandise will be in functionally and cosmetically perfect condition, putting it back on store shelves is logistically and financially inefficient. In most cases – especially in the case of open box, used, defective, damaged or seasonal items – it’s better to liquidate this inventory and recover as much as you can. Here is where having a proper liquidation solution in place can make a major difference to your bottom line.

If you’ve historically sold returned, excess or distressed inventory to one or two liquidators your recovery for this merchandise is likely low. Liquidators are professional negotiators; they increase their profit by buying at lower prices, not selling at higher prices. What’s more, the time spent negotiating one-off deals for every merchandise lot is inefficient and takes you away from core, strategic business activities.

Rather than treating liquidation as a reactive event, think about approaching it as a long-term strategic asset, in the form of a solution that is automated, sustainable and scalable depending on your liquidation needs. For example, the solution should be able to handle an uptick in returned inventory (like the months following the holidays) without sacrificing the recovery or velocity with which it is sold.

The most effective solution comes in the form of a web-based platform. This type of solution allows thousands of buyers to compete for your inventory, pushing prices up (versus a liquidator negotiating them down). Most likely there is already a robust secondary market and buyer base for your product(s); in every major city around the globe there are businesses that purchase excess and returned inventory for resale. The secret to success is the ability to gain access to this buyer base. A web-based solution is one way to make this happen. This could entail launching an online auction liquidation marketplace that can be customised, integrated, and marketed based on your unique inventory needs. By automating the process, ensuring a faster sales cycle and proprietary market intelligence in the form of real data on market prices, you can recover substantially more with less work which will positively impact your bottom line.

Many of the world’s top retailers, including the world’s largest retailer and e-retailer are using a web-based, automated auction approach and increasing recovery for their returned and excess merchandise by 30-80% and sometimes much more.

Take this example: one of the world’s largest home furnishings and décor e-retailers was experiencing higher volumes of customer returns due to explosive growth in primary sales. The inventory was being sold to a small group of buyers for a pre-negotiated price but as the amount of merchandise grew, so did the need for more buyers. By launching a branded B2B online liquidation marketplace the e-retailer made its inventory accessible to thousands of new business buyers from across the US who were able to bid directly on it via competitive online auctions; this boosted recovery rates by more than 30% despite a 138% increase in inventory volume. What’s more, this platform allowed the e-retailer to offload most all of the operational work associated with selling the inventory while accelerating the cash cycle.

When selecting an auction platform or online marketplace provider be sure to do your homework, there are a lot of choices out there and not all are created equal. The best ones will:

• Provide immediate access to a large group of interested, vetted buyers, authorized by you

• Create customized demand generation campaigns for your marketplace and auction lots

• Encourage competition and keep buyers engaged

• Allow you to sell from multiple locations, reducing the need to consolidate inventory and eliminating extra transportation costs

• Collect data on each transaction with analysis on how to improve recovery

In today’s retail landscape returns are inevitable: consumers are fickle and expect retailers to happily accept the 10% of purchases they bring/send back. Facing these returns head on with a technology-based program that automates liquidation and recovers more money for the merchandise is imperative. Remember, any increase in recovery – during returns season and all year long – goes straight to the bottom line.

Howard Rosenberg is CEO of B-Stock Solutions, a technology-enabled service company powering the largest network of private-label B2B liquidation marketplaces.

Image credits:
  • B-Stock Solutions