The world has seen a great deal of disruption over the past year and a half, with a global pandemic turning everything upside down. One of the most significant and obvious changes was a considerable jump in eCommerce shopping. But when it comes to sustainability, retail businesses have quite a bit of work to do.
As one would reasonably expect, the recent uptick in online shopping drives up return rates as well, and this has some very real implications for eCommerce’s environmental impact. With the Holiday season—by far the biggest shopping and return periods of the year—right on the horizon, businesses need to consider how they’ll handle the returns responsibly and efficiently.
THE RECENT RISE IN eCOMMERCE
The global pandemic has changed the way we do business, and it seems like some of the changes are here to stay. In early 2020, the novel Coronavirus brought our world to a screeching halt. As shoppers quarantined themselves in their homes to avoid exposure to the virus, many took to the internet for all of their shopping needs.
According to the UN, global online sales have grown to $26.7 trillion. In the US alone, online retail sales went from $598 billion in 2019 to $791.7 billion in 2020. Similar jumps occurred in countries like Australia, Canada, China, Korea, and the UK.
While COVID-19 certainly sped up the rise in eCommerce sales, online shopping was already becoming increasingly popular even before the pandemic. It seems that at least some of this eCommerce purchasing volume is here to stay regardless of how the pandemic progresses.
Along with the rise in eCommerce, consumer returns have grown in a big way. It’s estimated that about 30% of online purchases are eventually returned. Compare that to the 10.6% of merchandise returned across all channels and it becomes obvious how an increase in online shopping can affect the reverse logistics market.
There could be several reasons for this. When customers can’t physically touch, hold, or try on items before purchasing, they’re far more likely to return them later. And selecting the perfect item the first time around can be even harder when shopping for someone else, as one might do during the holiday season.
In fact, chances are that there’s nothing at all wrong with a returned product itself—instead, these are no-fault returns where the color, size or features simply weren’t what the buyer or recipient had hoped for. Still, these items are perfectly serviceable to someone else and should be put to good use.
HOW DO RETAILERS HANDLE RETURNS?
So how are retailers taking on this volume of customer returns? Consumers tend to assume that the goods they return are put back on store or warehouse shelves, but this is not often the case. Though the alternative is far from sustainable, many retail vendors find that remarketing returned merchandise simply doesn’t make sense from a financial standpoint.
Remarketing a returned item requires a thorough inspection to ensure that it’s still in like-new condition. It also may require workers to repackage the goods, reenter them into inventory tracking systems, and physically put them back on shelves, each of which costs a business time and money. If a retailer fumbles any one of these steps—for example shipping an item in tattered, opened packaging or not properly re-cataloguing an item—it could cause dissatisfied customers and slowdowns to delivery, damaging the brand’s reputation and bringing about other customer service nightmares.
Some brands have the resources to go through this entire process or sell items with high enough profit margins to make the process worthwhile, but more commonly, once an item is returned, it’s removed from inventory. What happens then?
Unfortunately, retailers too often simply trash or destroy it, burning the merchandise or dumping it into landfills. Some retailers do this for purely financial reasons, while others, regrettably, use destruction as a means of brand control. Whatever the reason, the amount destroyed adds up to about 5 billion pounds of returned goods each year.
Despite these challenges, responsible retailers are still on the lookout for a better way of dealing with these products.
USE THE SECONDARY MARKET FOR BETTER, GREENER LIQUIDATION
Since today’s consumers prefer to shop with brands that focus on sustainability, retail needs to find better ways to deal with consumer returns. One sustainable approach is to take advantage of the secondary market. By liquidating returned, damaged, and overstock merchandise, retailers can keep these products out of the landfill and instead give them another life.
Those who sell liquidation goods back to consumers are experts at remarketing used or damaged products. Since it’s often their primary business, such people and organizations inspect each item carefully before selling to make sure they are functional and look as the customer would expect. Even damaged and salvage goods can find a home with buyers who repair them or break them down and sell them for parts. But how do retailers get their goods into the hands of these businesses? That’s where liquidation services come in. Retailers should take caution however—they will find that not all liquidators are created equal.
WHERE TRADITIONAL LIQUIDATION FALLS SHORT
Traditional liquidation services buy large quantities of goods and profit from reselling them to the stores that will ultimately recirculate them to consumers. But often, they offer extremely low take-it-or-leave-it prices and may be just the first of several layers of middlemen to take their cut from large retailers’ inventory. If retailers want to secure better deals, they’ll have to either try to negotiate—not always a welcome proposition—or manage relationships with many liquidators to secure a more generous offer. These processes represent a significant time and labor investment that’s rarely justified by the meager recovery rates. And even if a longstanding relationship with a particular liquidator is fruitful, it still represents a potential point of failure in the process if that liquidator should close its doors.
Another complication that traditional liquidation methods can’t solve? Retailers shouldn’t sell to just anyone who will buy. They don’t want resellers to compete with their primary sales channels, nor do they want to see their products sold in ways that don’t fit their hard-won image. When retailers liquidate returned or damaged inventory, they’ll need some guarantee that the buyer will abide by certain rules, such as where in the world they can resell. Only with such agreements in place can a retailer rest assured that their goods are going to a trusted partner who will recirculate them into the secondary market without damaging the brand’s image or stepping on the organization’s normal sales operations.
MAX OUT RECOVERY WITH PRIVATE AUCTIONS
The traditional liquidation model is flawed, and savvy retailers know they need to connect more directly with vetted buyers interested in their inventory. Online auctions in a private marketplace are a preferable alternative, as they rely on an always-there, always-hungry network of buyers who compete for unsold merchandise, guaranteeing the highest price that the market can supply.
If your organization has never tried liquidation auctions to handle your excess inventory before, there’s one solution that addresses each of the issues outlined here. With a team of experts to help retailers craft the most profitable auction listings, B-Stock can help quickly offload pallets or truckloads of products for the best price the secondary market can offer.
Want to learn more about how to leverage the secondary market as eCommerce and the related ramp up in returns this holiday season? Download B-Stock’s 2021 Holiday Playbook today.