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The retail industry’s struggle with high return rates—especially since the onset of Covid-19—is well-documented, with retailers handling $761 billion in product shipments last year. But another question remains: What do retailers usually do with the products they receive from consumers?
According to a Retail Systems Research (RSR) report, 44 percent of fashion and specialty retailers and brands place returned products on the same new shelf as possible in-store. That’s 22 percent more than discounted items sold as “open box/returned/damaged” in stores.
Fashion retailers are mostly in line with their fast-moving consumer goods (FMCC) counterparts, selling returned products 45 percent as new and selling them at a 15 percent discount. But they are more likely to sell at a discount (50 percent of hardware retailers and 53 percent of general merchandisers) and much less likely to sell as new (8 percent of hardware retailers and 26 percent of general merchandisers).
This puts fashion retailers in a dilemma, because similar items cannot be distinguished from new clothes even after a few wears. However, one nick, snag or makeup smear and consumers may soon discover that the item is not as advertised, which can lead to public outcry. The negative effects of the practice, even if not malicious, indicate that dealers can go down a slippery slope when they pass off used product as new.
“For things that are already in the store, the main fault here is the planning of what that store needs in terms of bias,” the report said. “But for items that are not in the collection, such items will stick out like a thumbs up, and consumers can tell that such item has been previously owned and restored.”
Specialty/fashion players are a step ahead of their time in returning to a centralized facility to distribute a product, as are 17 percent. 8 percent of hardware retailers and 5 percent of general merchandise retailers ship their products to a central location.
Across all retailers examined in the report, the ability to accept returns is critical to retail “winners.” Seventy-five percent of retailers consider receiving returns to be a high-value service, compared to only 40 percent of others. Fortunately, all retailers seem to understand the value in real-time visibility, with 75 percent of winners seeing its value to their organization and 68 percent of other retailers agreeing.
RSR’s definition of winners is any retailer with comparable store/channel sales growth greater than 7 percent, and retailers are “average” at this rate of sales growth. Those below this sales growth rate are labeled as “Lagging”.
There are large gaps in both groups when it comes to other complementary options. Seventy-four percent of retail winners consider meeting scheduling to be a high-value service, compared to only 40 percent of others. And 70 percent of winners value online order management systems’ ability to direct customers to the best pickup location, compared to just 28 percent of average retailers and lagging retailers.
Overall, there’s a gap between 82 percent of retail winners who view in-store fulfillment solutions as a high-value employee technology and 64 percent of other retailers who appreciate the technology.
Beyond the complementary process, fashion players in particular may have a different perspective than other sectors on capital allocation in general and the requirements necessary to improve their business.
According to the RSR report, 61 percent of fashion and specialty brands and retailers say they don’t even touch on the Return on Investment (ROI) issue, while 67 percent of FMCG retailers say the same. These totals are better than 37 percent of all dealers and 42 percent of hardware dealers who have reached that level.
What sets fashion retailers apart from other retailers is their sense of how well they can build an in-store experience. Two-thirds (67 percent) of fashion and specialty retailers say their stores have too much going on and can’t afford to take on more projects. This is ahead of 48 percent of FMCG retailers and 32 percent of general merchandisers who believe this.
However, beyond the store aspect, fashion is still very open to new technologies and innovations in relation to other retail sectors. Only 17 percent said existing technology and infrastructure prevented them from moving forward with new solutions, the lowest of the retailers surveyed. At the opposite end of the spectrum, 75 percent of hardline retailers believe that their current technology stands in the way of further evolution, while 47 percent of general retailers share this sentiment.
Therefore, fashion marketers don’t really realize that new technologies can distract them from their overall goals. Thirty-nine percent said the new technology was a tool or a distraction, while 53 percent of general merchandise had this internal conflict.
Regardless of the roadblocks retailers cite, pilot programs are consistently considered the most preferred solution across sectors. Half of the 82 retailers surveyed said deploying pilot programs to ensure ROI in specific stores and regions is a key way to overcome persistent organizational barriers. Another 45 percent emphasized the value of obtaining supplier funding for in-store projects, while 34 percent preferred managed services to accelerate technology implementation.
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