Online retailers face significantly higher return rates compared to their brick-and-mortar counterparts due to several key factors. The inability of customers to physically inspect products often leads to size and fit issues or misunderstandings from images or descriptions. Furthermore, generous return policies and free return shipping encourage impulsive buying, which results in post-purchase regret and the return of multiple size or color variations tried on at home. Delivery issues, such as damaged or incorrect items and delays, also contribute to the elevated return rates.
To complicate things further, we have found that small and mid-sized online retailers have real challenges managing the reverse logistics process. They are often heavily dependent on 3PLs (third-party logistics providers) for returns management, refurbishment, and resale tasks. These retailers lack the physical infrastructure their brick-and-mortar peers have, making it difficult to handle the volume and variety of returned items.
What is Recommerce?
There is a growing trend called ‘recommerce,’ which may be the solution businesses need to recover value from customer returns. Recommerce, also known as reverse commerce, is not just about selling returned products. It’s a strategic approach that involves the systematic collection, processing, and resale of returned and previously owned new or used products through physical or online distribution channels to inventory buyers who reuse, recycle, or resell them. This process helps businesses recover value from returns and aligns with increasing consumer awareness of sustainability and the desire to make more environmentally conscious purchasing decisions.
Recommerce is not just about sustainability, it’s also a smart business move. By extending the lifecycle of products, retailers can recoup some value from items they no longer need. This growing trend aligns with increasing consumer awareness of sustainability and the desire to make more environmentally conscious purchasing decisions, offering a win-win situation for both retailers and consumers.
Key aspects of recommerce include:
Environmental Impact
Recommerce plays a crucial role in reducing waste and minimizing the environmental footprint associated with manufacturing new products. By promoting the reuse and recycling of items, recommerce extends the lifecycle of products, thereby decreasing the demand for new goods and the resources required to produce them. This practice not only conserves raw materials and energy but also cuts down on the waste generated from discarded products. As a result, recommerce supports a more sustainable and circular economy, contributing to environmental conservation and reducing the overall impact on our planet.
Financial Benefits
.Selling customer returns can provide businesses with significant financial benefits. With recommerce, companies can recoup a portion of their initial investment, reducing losses associated with returns. This practice also helps clear inventory more efficiently, freeing up warehouse space and reducing storage costs.
Now that we’ve uncovered recommerce let’s discuss the retail buyers of customer returns. Recommerce has become a key strategy for large businesses such as Walgreens, Lowe’s, and Home Depot, which have the expertise to extract high value from retail returns.
Key Buyers of Returned Merchandise in Recommerce
Here are some of the primary types of customers that buy these returns:
Refurbishment Centers
Refurbishment centers specialize in repairing and restoring returned items to a like-new condition. These centers often handle electronics, appliances, and other high-value items. Refurbishing these products can be resold at a lower price point, providing value to budget-conscious consumers while reducing waste.
Bin Stores
Bin stores purchase returns in bulk and sell them in a “treasure hunt” style retail environment where customers can sift through bins of assorted items at discounted prices. These stores appeal to bargain hunters looking for deals on various products, from electronics to household goods.
Online Marketplaces
Online marketplaces like eBay, Amazon, and Poshmark allow individuals and businesses to resell returned or pre-owned items. These marketplaces reach a broad audience and offer sellers the flexibility to list a wide range of products, from clothing and accessories to electronics and home goods.
Scratch & Dent Retailer
Scratch and dent retailers focus on selling products that may have cosmetic imperfections but are otherwise fully functional. These retailers often deal in appliances, furniture, and electronics, providing customers with significant savings on slightly flawed but usable items.
Liquidation Companies
Inventory liquidation companies buy large quantities of returned merchandise from retailers and resell them in bulk to other businesses or consumers. They often deal with overstock, shelf pulls, and returned items, offering them deep discounts. These companies are essential in clearing excess inventory and making new products available.
Goodwill Retailers
Goodwill retailers and other charitable organizations accept returns and pre-owned items as donations, which they then sell in their thrift stores. The proceeds from these sales support their charitable programs and services. Shopping at Goodwill provides consumers affordable options while contributing to a good cause.
Each of these recommerce channels plays a vital role in the retail ecosystem. They ensure that returned items are efficiently reused or resold, reducing waste and providing value to consumers and businesses alike. Understanding these channels is key to making the most of the recommerce strategy.
What is the Resale Value of Returned Merchandise?
There is a wide range of what retailers can expect to recoup, and it can be anywhere between 2% to 60% of the original value for returned items, based on the factors below:
Condition of the item
One of the key factors that determine the resale value of a returned item is its condition. Items that are returned in new or like-new condition typically have a higher resale value. This underscores the importance of maintaining the quality of products throughout the entire retail process.
Value of Brand
Bands with a recognized name always command substantially more value than products with little to no brand recognition.
Type of Product
Electronics, fashion, and luxury items often retain higher resale values than lower-end consumer goods or household items.
Market Demand
High-demand items tend to have better resale values. Slow-moving or seasonal items will lower resale value if returned out of season.
Packaging and Accessories
Products returned with original packaging and accessories often fetch higher prices.
While 10% in recovery value from returns may not seem like a lot on the surface, it certainly adds up. When you are sitting on tens of hundreds of thousands of dollars in retail value of customer returns, that becomes a substantial number. Imagine having an extra few thousand dollars a month to put into your marketing budget.
Want to know the value of your inventory?
Conclusion
To sum up, the increasing number of customer returns presents both challenges and opportunities for retailers. To make the most of these returns, businesses need to concentrate on recommerce strategies. This could involve partnering with outlets specializing in reselling customer and retail returns, such as refurbishment centers, bin stores, online marketplaces, or even setting up their own recommerce programs.
This approach not only helps in recouping losses but also promotes sustainability by reducing waste. Embracing recommerce allows retailers to turn potential setbacks into profitable ventures, ensuring a more resilient and resource-efficient business model.
FAQs
How does recommerce differ from traditional eCommerce?
Traditional eCommerce focuses on selling new products, while recommerce emphasizes the resale of pre-owned, refurbished, or returned items. Recommerce aims to extend product life cycles, reduce waste, and promote sustainability.
Why is recommerce gaining popularity among eCommerce retailers?
Recommerce is gaining popularity due to its environmental benefits, cost savings, and the growing demand for extreme-value shopping options. Additionally, it provides retailers with new revenue streams and opportunities to engage with eco-conscious customers.
What challenges might retailers face with recommerce?
Retailers may encounter challenges such as managing the logistics of returns and refurbishment, ensuring the quality and safety of recommerce products, and effectively marketing these products accurately to consumers.