Now add to that abundance another product category that stores need to deal with: returns.
So instead of collecting returned items on this growing stockpile, stores are considering just giving customers their money back and letting them hang on to the things they don̵[ads1]7;t want.
“It would be a smart strategic initiative,” said Burt Flickinger, retail expert and CEO of the retail consulting firm Strategic Resource Group. “Dealers are stuck with excess inventory of outstanding levels. They can not afford to take back even more of it.”
Returned products are handled in a number of different ways, he said. Retailers take back goods from the customer, evaluate them, and if they are in good condition, they put them back on the shelf at the same or lower price.
They can refurbish damaged returns and sell them for less or transfer them to liquidators to resell them. They can also sell returned products to foreign liquidators for sale in Europe, Canada or Mexico.
“Given the situation at the ports and the shortage of containers, it is not really an option to send products abroad,” said Flickinger. Finally, retailers can hire third-party companies to handle all aspects of returning goods for them.
However, each of these options reduces additional costs for retailers, he said.
“For every dollar in sales, a retailer’s net profit is between one cent to five cents. With returns, for every dollar in returned items, it costs a retailer between 15 cents to 30 cents to handle it,” Flickinger said.
There is another option for retailers to grab returns while avoiding more product inflation, and that is to consider a “return-free return,” said Steve Rop, CEO of goTRG, a company that processes over 100 million returned items annually. for companies like Wal-Mart, Amazon and Lowe’s.
Just keep it
Rop said that the company’s customers are 100% considering offering the “keep it” option for return this year, although he will not reveal whether any of his customers have implemented the “keep it” return policy yet.
In some cases, when they find that it would be easier, some retailers advise customers to just keep or donate the return after issuing a refund. Walmart said it had nothing to share at this point. Lowe’s did not comment on the story.
“The discounts are already in stores to clear out products, but when there are big discounts, buyers’ remorse increases. People are tempted to buy a lot only to return it later,” he said.
Reimbursing customers and at the same time letting them keep the return is not a new practice, Rop said. “It started with Amazon several years ago,” he said.
The offer makes sense for certain types of products – large items at lower price levels such as furniture, kitchen appliances, home furnishings, highchairs, walkers, prams where it is expensive for the retailer to cover the shipping cost for the return.
“Other products such as children’s toys, footwear, towels and bedding raise health concerns when it comes back. It can also apply to these categories,” he said.
Another concern with cheaper goods: Stores usually offer discounts on returned products, so the amount of money they can make on a reasonable return is minimal – and may not be worth the exchange, says Keith Daniels, partner with Carl Marks Advisors.
Nevertheless, a “keep it” policy has its own drawbacks, namely: Businesses must ensure that they do not fall victim to fraud.
“One thing retailers need to track and ensure is that customers become aware [Keep it] “Politics do not start abusing it, by seeking free items over a series of orders by getting a refund, but getting to keep the items,” Daniels said.