In recent years, the rise of returns has become a growing issue for retailers. As the industry continues to evolve based on consumer demand, retailers have recognized a need to focus on the customer experience across all sales channels.
This focus on delivering an optimum customer experience and providing seamless and low-cost returns has been part of this strategy. However, this has had a negative impact on retailers and their overheads. According to the 2022 NRF returns report, $761 billion in sold merchandise was returned to retailers. This figure accounted for 16.6% of total retail sales in the United States, and marks a significant increase from 10.6% in 2020. It has been suggested that eCommerce has impacted how customers shop and contributed to additional returns.
Understanding the Returns Challenge
According to the same NRF findings, in 2022, retailers claimed that 16.5% of sold items were eventually returned. Due to slow and outdated internal processes, returns can be extremely costly for retailers. When a product is returned, it goes through several stages of the reverse supply chain before it can be resold. This process can take weeks to months before an item is returned to the store floor. As items spend more time off the shelf, the resale price falls.
Retailers experience a drop in profitability when 42% of returned items are sold at a discounted price, and 12% are not resold at all. According to the State of Retail 2022/2023 Part 2, the average price reduction for returned items is ~38%. Many retailers believe that handling returns are simply a cost of doing business. However, as returns worsen, retailers must recognize the importance of providing a streamlined returns process that maximizes efficiency and minimizes costs.
Overcoming Ongoing Issues
When it comes to the underlying issues behind internal returns processes, the 2022/2023 State of Retail report found that 32% of retailers say spending too much time manually processing individual items is a significant challenge to their current returns process, while 26% blame a lack of staff to process returns. The ongoing labor shortage has brought these issues to the attention of retailers, with many stores now operating with fewer employees.
According to Deloitte’s 2022 report, the retail industry requires at least one million additional workers to operate efficiently. Furthermore, with the increasing number of returned items across the industry, more solutions for processing returns are urgently needed. Modern retail technology solutions, such as item-level RFID, can help to streamline returns processes.
By deploying item-level RFID, retailers can track inventory effectively throughout their reverse supply chain and eliminate the time spent manually processing returned items. The result is that returns are processed faster and returned to the store floor more quickly. This approach increases the possibility of selling items at full price, while decreasing the labor required to process returns.
Optimizing Returns for the Ultimate Customer Experience
With the right technology, retailers can streamline the product return process. By ensuring items are back on the sales floor in a reduced timeframe, it helps to preserve sales margins. Through the use of RFID technology, retailers can greatly enhance their omnichannel offerings. With visibility of all items returned, at any location, better fulfilment options can be offered. For example, buy online, return in-store allows customers to return items at their closest brick and mortar store. Not only does this provide a highly convenient solution for consumers, it also enables retailers to elevate the customer experience and suggest alternative items to purchase.
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