5 Tips for Retailers to Recover Lost Revenue From Holiday Returns

For most retailers, the beginning of the year almost always kicks off with slowed sales and a surge of product returns. When inventory is returned in mass quantities, businesses can be left with a holiday hangover — not to mention a large pile of items that usually end up being thrown out or liquidated for a fraction of the original price. This is especially true of seasonal or outdated items.

This annual phenomenon can be especially painful for online retailers, which experience a higher volume of returns throughout the year and whose items are returned three to four times as frequently as in-store purchases. In fact, with online shopping now accounting for just under 20 percent of all retail sales, shoppers have come to expect a seamless returns experience. And consumers are changing their buying habits accordingly — 96 percent say free shipping is the most important factor when considering where to shop online, and 79 percent say free returns is the second most important. With rising costs and record volumes of returns, retailers can implement several strategies to improve their reverse logistics operations, minimize waste, and recoup lost revenue.

1. Improve inventory visibility.

Recouping lost revenue begins with gaining visibility into your inventory. Greater visibility allows retailers to better understand customer purchasing behavior, promote exchanges and upsells, and make returned items available across the sales channels that will most likely lead to a purchase. The ability to do this quickly also increases the chances of reselling returned items at full price. Perhaps an item sold out online but didn’t perform well in-store. Or certain locations had difficulty moving product, while others quickly sold through their stock. Using the right inventory management platform will help maximize the visibility and availability of inventory across your business.

2. Create the right omnichannel returns policy.

With the option to buy in-store, online or via third-party marketplaces, consumers have come to expect support for returns across all channels. According to UPS, 73 percent of shoppers say the returns experience affects their likelihood to purchase from a retailer again. No matter where items are initially purchased, shoppers appreciate and anticipate a seamless return process. However, retailers must enact policies that aren’t so lenient that they’re taken advantage of, but also not so strict that they deter initial or repeat purchases. This can be tricky, as return policies can look very different across industries. For example, a beverage company won't be able to repurpose returns in the same way as a clothing brand. Retailers should keep a close eye on consumer habits to strike a balance between customer retention and product returns.

3. Validate all returned goods.

Many businesses don't realize the extent to which they lose money to fraudulent returns. Combat fraud by validating returned items — every single one. Having record of customer orders in a single system enables retailers to connect a customer with specific transactions and items sold to help identify frequent abusers. While it may seem daunting to validate and process a mountain of returns, many companies specialize in this reverse logistics process. Partnering with a third party can be a great first move for companies inundated with returns.

4. Build sustainable processes.

Returns ending up in the dump are bad for the environment and bad for business. Reuse, recycle and salvage items whenever possible. Successfully doing so recoups revenue and, more importantly, builds positive brand equity with customers. Take it a step further by considering the full lifecycle of your product during development. Additionally, retailers should strive to minimize product touches to avoid increasing the cost of goods sold (COGS). For example, if an item goes back into inventory at a store — even if it was purchased online — rather than shipping it back to the warehouse saves shipping costs and reduces fuel, which leaves more room to recover some of the money lost on a return. Another way to avoid this is to drop-ship an item directly from the return location to fulfill a future order, rather than sending it back to the warehouse to reduce handling. By adopting sustainable practices, businesses reduce waste, extend the shelf life of goods on the market, and ultimately help their bottom line.

5. Get the right systems in place.

With the holiday season behind us, now is the perfect time to get the right systems in place to optimize returns in the future. Retailers that embrace the automation cloud systems offer can simplify the returns process, minimize waste, and increase profitability. The right software should enable you to immediately return items to inventory to sell, accept returns from all channels, complete exchanges, manage store credits, and set returns process rules. In addition, inventory management and financial systems, such as a cloud enterprise resource planning (ERP) system, can help you find the root cause of overstocks. It can also help you plan for different scenarios and correctly forecast inventory and budget against those scenarios. With the pandemic and recent supply chain issues, there has been no shortage of challenging scenarios that retailers have been confronted with. However, certain technology systems can make those a little more bearable.

While returns are inevitable, the associated lost revenue doesn’t have to be. Following these tips can help your business match inventory to demand and be ready for the next holiday season.

Abby Jenkins is product marketing manager of supply chain for Oracle NetSuite, an integrated cloud business software suite, including business accounting, ERP, CRM, and e-commerce software.