Retail’s struggle with high return rates — especially since the onset of Covid-19 — has been well documented, with retailers handling $761 billion in product shipments last year. But another question remains: what do retailers typically do with the product they receive from shoppers?
According to a Retail Systems Research (RSR) report, 44 percent of retailers and fashion and specialty brands place returned product back in the store on a sales shelf whenever possible. That’s double the 22 percent who resell discounted items in stores classified as “open/returned/damaged boxes.”
Fashion retailers are largely in line with their fast-moving consumer goods (FMGC) counterparts, selling returned products as new 45 percent of the time and selling at discount 15 percent of the time. But they are a far cry from their hard goods and general merchandise equivalents, who are more likely to sell at a discount (50 percent of hard goods retailers and 53 percent of general merchandisers) and far less likely sell as new (8 percent of hard goods retailers and 26 percent of general merchandisers).
This puts fashion retailers in a dilemma, as like-new items can be virtually indistinguishable from a new garment even after several wears. However, one blemish, blemish or make-up and consumers may soon find that the item is not as advertised, which can lead to public backlash. The potential negative implications of the practice, even if not done maliciously, illustrates that marketers can go down a slippery slope when they misidentify a used product as new.
“For items in a collection that already exists in the store, the main insult here is that the plan for what that store might need from an allocation perspective is off,” the report said. “However, for non-collectible items, such items stick out like a sore thumb and buyers will likely be able to tell that such an item has been owned and returned before.”
Specialty/fashion players are one step ahead of their contemporaries in returning a product to a central facility for redistribution, with 17 percent doing so. Only 8 percent of hard goods retailers and 5 percent of general merchandisers ship product to a centralized location.
Across all retailers examined in the report, the ability to accept returns is very important to retail “winners.” Seventy-five percent of retail earners consider accepting returns a high-value service, compared to just 40 percent of all others. Fortunately, all of retail seems to understand the value of real-time visibility into available products, with 75 percent of winners seeing its importance to their company and 68 percent of other retailers agreeing.
RSR’s definition of winners is any retailer with comparable store/channel sales growth above 7 percent, while merchants with this sales growth rate as “average.” Those below this sales growth rate are labeled as “leftovers.”
There are significant gaps in both groups when it comes to other fulfillment options. Seventy-four percent of retail earners consider shipping pickup a high-value service, compared to just 40 percent of others. And 70 percent of winners value the ability for online order management systems to direct customers to the optimal pickup location, compared to just 28 percent of average and lagging retailers.
Overall, there is still a divergence between the 82 percent of retail winners who see in-store fulfillment solutions as high employee value technology and the 64 percent of other retailers who value the technology.
Beyond the fulfillment process, fashion players in particular may also have a different perspective than other sectors on the overall capital allocation and requirements needed to improve their business.
The RSR report found that 61 percent of fashion and specialty brands and retailers say they never get around to the topic of return on investment (ROI), while the same was said for 67 percent of FMCG retailers. Those totals are far higher than the 37 percent of general merchandisers and 42 percent of hard goods retailers who reach that point.
Where fashion retailers really differ from the rest of retail is their sense of how much they can build their store experiences. Two-thirds (67 percent) of fashion and specialty retailers say their stores are already too busy and don’t have the capacity to take on more projects. This is well ahead of the 48 percent of FMCG retailers who believe this, and the 32 percent of general merchandisers with this mindset.
However, apart from the store aspect, fashion is still more open to new technologies and innovations compared to other retail sectors. Only 17 percent say their existing technology and infrastructure prevents them from moving forward with new solutions, by far the lowest rate of the retailers surveyed. On the opposite end of the spectrum, 75 percent of sales hardliners believe their current technology prevents further evolution, while 47 percent of general marketers share this mindset.
As such, fashion marketers don’t really understand that new technologies can distract them from their primary goals. Thirty-nine percent said they were conflicted about whether new technologies would be tools or distractions, while 53 percent of general marketers had this internal conflict.
Despite the barriers retailers cite, pilot programs are consistently considered the most favored solution across sectors. Half of the 82 retailer respondents to the survey said that deploying pilot programs in specific stores and regions to prove ROI was a key way to overcome persistent organizational roadblocks. Another 45 percent emphasized the value of procuring vendor financing for in-store projects, while 34 percent prefer managed services to accelerate technology implementation.
