Edition 110, September 2020

Maximizing Value from Returned Goods

By Robert Coolidge, Encompass

While consumer returns are inevitable, losing money on them does not have to be a given. On the contrary, such goods could actually be able to help savvy businesses be more profitable.

According to a 2019 study of returned goods, the consumer electronics industry spends an estimated $17B per year on returns related processes. Contributing to this astounding figure were millions of dollars’ worth of product returns that were in perfectly good working condition. The study found that 41% of consumers surveyed had returned no fault found electronics purchased within the previous 12 months in both physical stores and online.

Consumers cite a variety of reasons for returning non-defective products. Chief among them include: unpackaging is too frustrating; installation or use is too complex; and product was not what they envisioned or expected. To combat confusion, some manufacturers and retailers offer detailed instructions for product use. Others tighten return policies, although this can be tricky since many companies offer liberal no hassle returns as a competitive selling point.

Fraud is also in the mix of costly challenges. Some manufacturers issue credits to end users for goods returned to retailers. Oftentimes these goods later show up for resale on various online marketplaces. For products under warranty, new replacements may be provided to consumers, along with instructions to discard the non-working unit. When returns exceed anticipated failure rates based on manufacturer engineering data, profit forecasts can be significantly impacted.

There are various ways to maximize value of returned goods, but the starting point is strong checks and balances. Ensure there is comprehensive reporting on returns data with full validation. This should help minimize the risk of inflated credits and product being sold through unauthorized channels.

Require end users to send back defective goods instead of replacing them with brand new items. These returns can be tested with failure data analysis leveraged for development and engineering changes, reducing future failures.

For extensive cost savings, repair and/or refurbish returned goods and use them as warranty replacements. Excess refurbished units can be resold through online marketplaces to generate incremental revenue.

Since a large percentage of such returns will likely be found to be in proper working order, most will require little more than repackaging. It’s also very possible that requiring consumers to return all products could start driving fewer overall returns, which is the ultimate win.

Alternatively, returned goods could be used to harvest repair parts or sold to salvagers. Most available options are going to be financially more beneficial than simply trashing or losing them to the gray market.

Returns will always be a mainstay of the product lifecycle. Instead of being resigned to accepting losses, explore the different ways your business can limit the financial hit of returned goods and even make them profitable.

For more information about Encompass and how we can help your business maximize the value of returned goods and handle other logistics needs, please visit https://solutions.encompass.com/.

Robert Coolidge
Robert Coolidge was appointed President & CEO of Encompass Supply Chain Solutions, Inc. in 2012.  Since that time he has been highly instrumental in guiding the company to become one of the nation’s largest, most diversified providers of distribution, 3PL and 4PL solutions. Robert previously served as president of Vance Baldwin Electronics, which was acquired by Encompass in 2007. During his tenure at Vance Baldwin, Robert helped grow the company – founded by his grandfather in 1953 – from a local electronics parts supplier to a national distributor supplying original parts for a wide range of product verticals, comprising consumer electronics, appliance, computer, printer and many more.