Maximize Profits by Quickly Handling Retail Returns
This could be the “BIG ONE” …the best holiday selling season we’ve had in years!
Why am I so enthusiastic? The September Consumer Confidence Index was the highest it’s been in 18 years! Lynn Franco, Director of Economic Indicators at the Consumer Conference Board, said "Consumers' assessment of current conditions remains extremely favorable, bolstered by a strong economy and robust job growth. These historically high confidence levels should continue to support healthy consumer spending and should be welcome news for retailers.” Plus, the Consumer Technology Association has already forecasted a record-breaking $377 Billion in Consumer Tech sales this year!
We have all spent many months in preparation; designing products, sourcing products, manufacturing products, and shipping products. Retailer’s shelves and warehouses are full, and e-commerce sites are set! It seems the wind could finally be at our backs! Could all these positives signal record profits? Big bonus checks? Maybe, but only for the diligent.
Retail has gone through a massive transition over the past decade. We have seen many brick-and-mortar stores close and many on-line stores open. E-commerce has driven retailers and manufacturers into new unchartered waters. We love the additional sales, but we hate the e-commerce returns.
Forrester, as reported by the Wall Street Journal, projects just how extreme e-commerce returns can be. They state that typical brick-and-mortar product returns fall between 8 and 10 percent of sales, with normal e-commerce returns being double that at 20 percent. A huge difference. But, this is where it gets really scary! Forrester projects that holiday e-commerce returns leap to 30 percent of sales and “expensive” holiday item returns jump to 50 percent of sales.
With product returns of this magnitude, profits evaporate quickly and so do those big bonus checks. Unless of course, you are prepared and have a plan to quickly and efficiently recover and redeploy returned inventory. When I was a retail buyer we had a saying, “the first markdown is always the cheapest markdown.” Which basically means, “address the bad product with an aggressive markdown immediately when people are still in the market to buy.” This adds not only additional revenue but also clears retail shelves of bad product and frees up inventory dollars to buy new, profitable products. This simple philosophy also applies to manufacturers
Large product returns are inevitable. It’s the cost of doing business. The key to not getting burned is to have an “Asset Recovery” plan and to act quickly! Many small manufacturers try to handle the returns in-house and are often overwhelmed by the magnitude, so the returns sit, month after month, in a warehouse and their profit dollars and dollars available to buy new products evaporate. Major brands who sell into major retailers with liberal return policies are not excluded from this problem. They receive hundreds of thousands of product returns, that just like fruit in a grocery store…spoil quickly, even overwhelming them.
So, what’s the solution? There are several companies that specialize in handling product returns in a quick, efficient and cost-conscious manner. These companies are experts in triaging the return products, refurbishing them, repackaging them and sometimes even reselling them, limiting the profit loss to the manufacturers.
For the big boys, Foxconn, (www.foxconn.com) who is known for its “Big Brand” manufacturing prowess, also handles product returns and asset recovery and can expertly handle large returns.
For smaller manufacturers, requiring customizable programs, Selectron Solutions (www.selectronsolutions.com) offers a menu of services that focus on handling your retail returns, no matter how they come back from retailers….on pallets, in original cartons or plastic shopping bags.
As Ben Franklin said, “If you fail to plan, you plan to fail.” Be prepared when holiday product returns start coming back from retailers, by signing-up a third-party asset recovery company today. Wouldn’t it be nice if the only issue in January is how to spend those coveted bonus checks…earned from record sales in the best holiday selling season ever!