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Wholesalers don’t tend to view returns as an opportunity. An inconvenience, an additional cost, something to be avoided – sure. But, as we know, the rise and growth of eCommerce has changed the retail playing field – and now the wholesale sector too.
Average retail return rates in bricks-and-mortar stores were 8.89% in 2014, according to a study by Shorr Packaging. Move into the eCommerce arena, and these rates can exceed 30%, and be as high as 45% in the fashion sector. Indeed, in online fashion stores, it’s common for consumers to buy several items in different sizes, colours or other options, try them out and then return all but one. Many retailers have started turning these returns into a value-add service, taking the opportunity to harvest valuable customer data and plug it intelligently into business processes.
As wholesalers increasingly move their operations online, it’s vital that they follow savvier B2C retailers’ lead. You could argue that Wholesalers carry even more risk than retailers when it comes to returns, because they buy and sell in bulk and margins are tight – so they need to balance risk and reward extremely carefully. In the online world, if returns sit squarely under the ‘risk’ category, then wholesalers and distributors are playing a dangerous game.
A recent conversation with one of our customers really highlights just how costly this game could be for wholesalers. The customer had recently had a batch of product returned to them from one of the retailers that they supply. Ordinarily the boxes would have been placed in storage for dealing with at a later date. But on this occasion their processes, and our solution, picked up that they had never sold that particular batch of products to the retailer. On closer investigation the retailer was using multiple suppliers for the same product – and had returned the batch to the wrong supplier. If they hadn’t had the process, or the solutions, in place to properly manage returns it would have ended up costing them thousands in lost revenue and profit.
So while returns may never sit entirely in the ‘reward’ box, it is certainly clear that they need to be shifted more in that direction – both as a cost prevention measure and as a value add for customers.
Basic Principles: Making Returns Easy to Manage
First things first – as they shift more of their operations online, wholesalers need to ensure that the returns they do have to deal with are a) absolutely necessary and b) easy to manage.
A significant proportion of returns from online sales are due to the customer purchasing the wrong product or not knowing how to use it – and those purchases in turn are driven by inadequate product descriptions. Back in the days when wholesalers depended on product reps, they could afford to have flimsy descriptions in their catalogues because a personal discussion would shore up the gaps. Now, many customers will complete their purchases without ever speaking to the wholesaler in question. It’s therefore critical that they know exactly what they’re purchasing and how to use it. And that means crisp, clear – but deeply informative – online product descriptions, backed up with rich digital content such as instructional videos and downloadable PDFs.
Next, wholesalers need to consider the returns process itself – not just ensuring that it’s as efficient as possible, with a short time to get saleable products back in the warehouse – but also ensuring that all relevant information is centralised, so that they have an accurate, unified view of stock control. This means getting rid of silos between different sales channels, so that a batch of returns through one channel is visible to another. Real-time analytics are also a must, ensuring that a new batch of product A isn’t ordered five minutes after another batch has just been returned (in a saleable condition) by a customer.
Data Mining: What Do Returns Teach You?
A huge amount of potentially useful information is embedded in returns – and this information can both inform future business practice, and even be used to offer customers actionable insights.
This process can be very simple. For example, knowing that a customer has returned product B because it was the wrong size for their premises makes it very easy to offer product C instead.
But such insights can also be extremely sophisticated. Clever analytics around returns can allow wholesalers to track trends around buying and return patterns – to understand, perhaps that a particular customer always over-orders product D at a particular time of year, but could therefore be cross-sold product E as an alternative. Of, if one customer has returned a batch of products because they didn’t understand how to operate them, this situation can be rectified for other customers with an instructional video.
Maximising Profitability: What to Do Next
Just a few short years ago, many wholesalers, and indeed consumer-focused retailers, had no alternative but to send returned products straight to landfill. Now, effective returns technology can enable them to smoothly manage returns and convert them into a degree of profit, with a myriad of options now available. For instance, can a product be refurbished? Can it be broken down and sold as parts? Does the wholesaler have an eBay store for shifting products out of their original packaging something that we see more and more prevalent in the 3PL space?
In addition to this, many of the data trends mined from returns can also allow wholesalers to make intelligent decisions in terms of business strategy. For example, accurate information around the reason for returns, as well as predictions as to when particular products are most likely to be returned, can help with maximising resell value. Tracking trends of faulty products can help with the identification of reliable and unreliable manufacturers – and therefore better procurement decisions. If particular customers are perpetual returners, then it may be time to set up a meeting to discuss how to work together better.
In other words, intelligent digital information around returns can help pinpoint appropriate offline activity to continue driving the business forward. Returns data can help shape how wholesalers manage their customers and their suppliers – and in turn, do better business.
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