Retailers and brands have always focused on sales as the driving force of their partnership. Conversely, they spent far less time discussing and planning for returns. When customers shopped primarily in brick-and-mortar stores and returned less than 8-10% of purchases, the need for reverse logistics strategy and forecasting was not as significant. However, today, online shoppers return about 20% of orders, contributing to a $761 billion industry of surplus items. Retailers and brands know they must adjust their returns contract terms to match this new reality, but they lack access to the tools needed to re-imagine returns as the lucrative vertical it can be. When considering end-to-end returns management, policies may only be one piece of the puzzle, but the ability to manage them collaboratively and dynamically is a crucial and foundational component to being able to solve returns.
Currently, most retailers and brands operate using outdated contracts with unfavorable terms and manual systems. Both sides struggle to handle the onslaught of returns while maintaining forward-sales focus. In the process, they encounter communication, transparency, and trust challenges that cost millions of dollars in lost profits and productivity.
As returns volumes continue to rise, retailers and brands need solutions that foster stronger partnerships and higher recoveries. They need intelligent, centralized software that is laser-focused on decluttering reverse logistics policy management. Fortunately, retailers and brands can synergize on the best outcomes for both sides with modern, data-driven tools and transparency.
Top Policy-Related Challenges for Retailers and Brands (and Returns Technology Solutions)
Seamless communication is one of the most critical aspects of efficient returns management. Retailers and manufacturers must have clear communication lines open so they can resolve Returns Authorization (RA) requests and ship items as quickly as possible to maximize recovery and reduce dead stock. Yet, our experience shows retailers struggle to process returns because they can’t easily collaborate with their partners. Even the most sophisticated enterprises often operate using legacy tools such as Microsoft Excel to manage their product agreements. Often, these spreadsheets hold outdated contact information, making it challenging to get in touch with the right decision-making contact. This leads to significant wasted time and effort searching for details that could be easily accessible with the right technology in place. Furthermore, this lengthy process ties up working capital, preventing retailers and brands from managing their daily expenses efficiently. Let’s say a retailer’s annual sales are $15 billion and that they have a blended 10% returns rate of $125 million per month. Typically, it takes 4 weeks to reconcile a return – leaving those could-be dollars inaccessible. However, a proper returns management solution could reduce that processing time to one week, allowing almost $94 million in cash flow to become available each month.
Even more consequential than working from incorrect contact details, a lack of transparency carries over into policy terms. So, even if a retailer knows it can return certain items to a manufacturer for credit, it may lack visibility into the correct logistics provider, packaging instructions, or shipper account–significantly delaying the Return to Vendor (RTV) process allowing the inventory to age and lose value.
Worse still, retailers may be missing out on returns credit opportunities because they lack visibility to know whether the item is eligible to send back to the brand. On the flip side, they may accidentally return ineligible items, creating mistrust and administrative headaches on both sides. Considering that enterprise retailers manage thousands of brand partners, this transparency problem can quickly snowball into wasted hours, manpower, and resources.
Returns Technology Solutions
Existing policy management software works well for forward-sales management. Until recently, however, adequate returns policy management tools did not exist. Fortunately, that’s changing with the advent of centralized platforms that serve as a public ledger for both sides. With such technology, everyone from account managers, accounting personnel, to warehouse teammates can access the same information, creating accountability for data accuracy from all involved parties.
Stakeholders can easily analyze RA and RTV rules for every product to determine whether they make sense given the current retail environment, or if change is in order. Through this shared space, retailers can also upload the latest contracts for every brand they manage. This allows both sides to review the terms, ensuring the latest agreement is accurate and financially beneficial based on the current market.
Returns Authorizations (RAs) are a vital aspect of many contracts which require retailers to submit requests for inspection before they can ship items back to the manufacturer for credits. Brands have historically required RAs from retailers so they could check the data, for a myriad of reasons, prior to accepting the return. However, this process often leads to miscommunication and is one major cause of unnecessary delays on both sides. These delays lead to devalued products, making it difficult to get a desirable recovery, or even sell, creating more loss.
Often retailers struggle to process RA requests because they lack convenient access to their brand contacts, or their contact is so busy that they miss out on important communications. As a result, retailers can wait days, weeks, or even months to hear back from a vendor. In the process, an expensive piece of merchandise may sit on a warehouse floor, collecting dust instead of revenue. Even when all the criteria for RA are met, the lengthy process can mean the retailer misses the eligibility period. Unfortunately, this scenario is far too common, and no one’s to blame. RA delays happen because both sides lack a centralized source of truth.
Today, policy management software exists to provide clear, actionable solutions to returns authorization challenges. So, instead of ping-ponging emails back and forth, retailers can log in to the shared platform and submit a push notification to the brand with their request.
Both sides can then communicate directly through the software, which tracks and records all requests, negotiations, and policy decisions. This ledger keeps both sides responsible for meeting inspection deadlines and ensures retailers only return eligible products to the brand. Additionally, the software records all RA items' current market value and processing costs, so retailers and brands can continually re-evaluate policies and contract terms.
In conjunction with RAs, return-to-vendor (RTV) terms comprise the most significant portion of retailer and vendor contracts. RTV allows retailers to send eligible items back to the vendor or manufacturer for credit–without inspection. Upon receiving RTV items, the vendor typically refurbishes, liquidates, or tosses them away, depending on the item’s condition and potential recovery value. In exchange, the vendor gives the retailer credits for replacements.
RTV is critical because it means retailers can recover value from eligible items that are returned. RTV is equally important for brands because it allows them to set reasonable limits on what they’ll accept from the retailer. Retailers and brands need more customizable policies that factor in RTV processing costs, yet most enterprises operate on one-size-fits-all policies. In other words, an electronics company working with a major general merchandise retailer might apply the same policy terms to a $20 USB cable as it would to a $2,000 laptop simply because they lack access to software that can apply different rules for these items.
Returns management portals with intelligent returns disposition software provide retailers and brands with the data they need to make intelligent RTV decisions at the product SKU level. The beauty of this technology is that it allows for meaningful insights based on deep data algorithms that analyze a host of factors, including:
After assessing all these factors, returns disposition software can objectively determine if RTV makes the most sense or if a different policy decision could lead to a more profitable outcome. Other disposition options include:
By factoring all returns costs against an item’s projected recovery value, brands and retailers can reconsider their policy terms on a UPC level, as opposed to category-level. For instance, this software may determine that products below $50 are not worth shipping and processing costs, and therefore issue the credit without requiring the retailer to send it back. At the same time, the software may identify an opportunity to resell the product on the secondary market.
Key Improvement Metrics for Retailers and Brands
By implementing returns policy management technology, retailers and vendors can improve their relationships, reduce administrative headaches, and instantly uncover new profits, transforming a highly complex process into an opportunity for revenue growth.
The Bottom Line
Historically, retailers, brands and 3PLs didn’t have access to best-in-class returns management software. They did their best to manage the everchanging world of returns but could not tackle the root cause of their inefficiencies because they lacked tools and resources specific to returns. The need for vendor, policy, and RA management is significant and can lead to millions in savings by offering all parties a shared portal to negotiate and update contracts that produce better financial outcomes. Other elements of returns management are equally ripe for disruption. External integrations to easily connect systems, SaaS that connects to the POS and eCommerce site to make the most lucrative disposition decision, a returns management interface for in-store and eCommerce to offer a seamless returns experience, Reverse Warehouse Management Software (RWMS) to maximize productivity, a robust ReCommerce solution to resell goods, and the ability to reconcile a return from initiation to final disposition, should all to be considered as part of an end-to-end post-return solution. Fortunately, as returns become a larger priority, investments will be made in returns management software that unifies these critical components of the reverse lifecycle and offers retailers and brands a way to solve even their most complex returns problems.