"National Returns Day"- Preparing your Inventory for the Inevitable

‘Tis the season for… post-holiday retail stress!

While November and December host several religious and cultural holidays, more recently these months have been known for their retail holidays such as Black Friday, Cyber Monday and Boxing Day that take place during this time and often last longer than just one day.

Unfortunately for retailers and logistics companies, the stress of the holiday season doesn’t end with Boxing day purchases. The influx of online and in-store returns will continue through the new year, making inventory and storage planning difficult to manage.

According to UPS, total in-store and online holiday sales in 2019 in the US alone are forecast at $138.5 billion (up by 13.5% from last year), and approximately $42 billion worth of those purchases are expected to be returned. On January 2, 2020 we are coming up to what is projected to be the largest spike in online returns, which UPS dubs “National Returns Day,” with a whopping 1.9 million packages projected to be returned through the UPS network, and even more through other networks.

This means that about 30% of purchases that retailers worked so hard to fulfill at record-high speeds this holiday season will be returned and pushed back into the supply chain by January.

The main challenges retail and logistics companies will face:

The reality of these consumer-driven holidays is that although it creates additional stress on the supply chains, retailers and employees working in retail, consumers still expect excellent customer service and for their returns to be processed quickly and painlessly as if it were any other day. This creates many challenges for managing consumer expectations, ensuring inventory levels are accurately tracked and making sure returned products are processed promptly for resale. Below are some of the main challenges

  • A high amount of inventory is subject to deprecation. This creates an urgency to get inventory back into circulation and ready for resale.
  • Increased shipments and handling during this time puts a lot of pressure on an already stressed supply chain, where increased labour costs and processing times can lead to significant profit loss when added up over time.
  • Although a majority of retailers provide shipment tracking on outgoing deliveries, only a fraction of them do the same for returned items — even though customers tend to check on in-transit packages an average of eight times.
  • Customers returning unwanted gifts could put retailers in the red or significantly hurt their margins if not planned for accordingly.
  • Many retailers plan for a portion of their products to be returned after the holidays, but it can be nearly impossible to predict how many of each product will be returned to the store or distribution centre. This can make planning inventory flow in the new year difficult.
  • High volume of shoppers and product demand creates increased stress on employees, which can lead to employee disengagement, decreased productivity and decreased levels of customer service.


Common trends this holiday season 

  • All e-commerce companies know to optimize fulfillment to prepare for peak selling seasons, but few take the same steps when preparing a strategy for processing returns.
  • 79% of consumers want a free return shipping policy, along with a simple and seamless return process. Retailers must match this to remain competitive.
  • E-commerce is changing the way consumers buy during the holidays. E-commerce sales have a much higher return rate than those of brick-and-mortar stores—between 15% and 30% online vs. 9% in-store.
  • 44% of those shoppers said the top issue encountered when returning an item online was paying for return shipping
  • 89% of customers said they would not shop again at a retailer or brand with which they had a negative returns experience.
  • Returns produce an estimated 5 billion pounds of waste in landfills and 15 million metric tons of CO2 emissions from transportation every year. Retailers increasingly must balance consumer demand with sustainability commitments while providing seamless return experiences


How can you prepare for and combat these retail challenges?

Turn a return into a new sale — Some shoppers will return their gifts for cash and leave the store, however, retailers can use the return as an opportunity to create positive engagement and a sale by turning the return into an exchange, or even better, an up-sell to more merchandise.

Take advantage of product bundling — Bundling products is an effective strategy for encouraging larger purchases while simultaneously selling returned merchandise. If certain items are getting returned more frequently than others, look for ways to group them with complementary products that are selling well. Then offer the entire package at one competitive price. Consumers feel like they are getting a deal with a bundled package and you can save resources from frequently processing returns of the same item.  

No physical location? No problem — Some retailers without physical locations are partnering with brick-and-mortar retailers, allowing customers to return items to a store instead of going through the hassle to ship a product back to the retailer. Amazon now offers free returns for Prime members in more than 1,150 Kohl’s locations, allowing customers to drop off their unpackaged items at the store while receiving a 25% discount at Kohl’s. This helps create a painless return experience for those customers who want the convenience of online shopping and the personal touch of brick-and-mortar.

Free up space by outsourcing – Many retailers, particularly those with a thin supply chain network, outsource their returns management to third-party logistics (3PL) providers to free up space for forward logistics.

Focus on excellent customer service – the right customer service staff could lead to the return not happening at all. Good customer service also helps improve customer loyalty and enhance brand reputation to promote further sales in the future. Make sure employees are fully versed on the process of product returns and all return policies.

Keep your listings up-to-date with an automated inventory management system – Creating a centralized inventory management system is critical to keeping track of products and avoid problems such as inaccurate inventory levels, lost stock, overstocking and understocking. Although manual management systems such as an excel spreadsheet may suffice for smaller organizations, the volume of returns and the amount of moving parts during this busy season could warrant an investment in an automated management system.

Prepaid return Labels — Amazon and many other large retailers offer prepaid return labels and a lenient return policy during the holiday season. Retail conglomerates such as them have now created a new standard for what consumers can expect. Retailers must now offer similar return experiences to be competitive with these companies

Track all customer data — Tracking return data will help you understand your customer needs for the future. Defective products could indicate a need for changes in production methods. It can also provide insights into what your customers want and how they use your products.