Optimizing Omnichannel Returns to Reduce Inventory Levels

Enabling shoppers to make ecommerce returns to their local store drives foot traffic, customer satisfaction and sales. In fact, 83.4% of shoppers told us in our 2018 Shopper Behavior Study that they spend their refund money in the store where they returned their purchase, and 24% said they do it often.

There are challenges associated with enabling both in-store and online returns, but the practice presents a significant opportunity.

The Challenge and the Opportunity

The challenge is, what to do with the thousands of SKUs available online when they are returned to a store that does not carry the items? Brick-and-mortar stores carry a small fraction of the items sold online. Today’s stores cannot simply put a returned item back on the shelf if that store isn’t set up to carry that specific SKU.

As online sales grow at double-digit rates, ecommerce return rates are growing even faster. They’re typically three to four times greater than for stores, and carry a high level of value. In fact, as much as 70%-80% of online returns are in pristine condition and can go back into stock.

The opportunity is for retailers to get them from the store back to fulfillment centers in quickly in order to maximize their value. To accomplish this, merchants need to answer two questions. First, “What’s the best practice to make this happen?” Second, “Is it worth the cost?”

Where Retailers Blow It

Many retailers prepare and process ecommerce returns just like they do store returns. This is where retailers bleed profit. Although, as mentioned, up to 80% of online returns are in pristine condition, the vast majority of returns at stores can’t go back on the shelf. Processing online returns with store returns cost retailers money in many ways.

Most online returns are in new condition and can go back into stock, whereas most store returns are not. If packed together with store returns, online returns will be damaged to some degree. Most often, store returns are not in the original packaging and half the time are damaged to some extent. Not only that, but most retailers do not have a system to get returned products back to fulfillment centers.

For every return that could go back into stock and doesn’t, a new item has to be procured to fill the new order. This needlessly drives up inventory levels. Worse yet, you may not have the inventory needed to fill the order and you lose the customer.

The Opportunity to Increase Profits

Omnichannel retailers have a big opportunity to save money if they adopt a process to get online returns back into inventory. The key is to segregate and prepare them for shipment in ways that protect them in transit to the fulfillment center.

Retailers also need a system and process to reintroduce this inventory into the FC. When properly prepared and with the right process, the vast majority of the online items can quickly be inspected, and pristine items are then shipped to the FC.

Is It Worth It?

Consider the impact for a retailer whose ecommerce returns rate average 30% of sales. According to data collected by Inmar, 75% of those returns could go back into stock. The correct returns process can reduce inventory by over 20%. Omnichannel retailers whose online sales account for 15% of total sales would reduce total inventory on the balance sheet by 3%. Companies that figure out how to reduce their inventory level by 3% are nicely rewarded by financial institutions and investors.

On average, retailers recoup less than 15% of the value of traditional retail store returns due to their condition. Adopting a process to properly package, segregate and process online returns will enable retailers to put over 70% of ecommerce returns back into stock, based on internal data from Inmar. This not only reduces inventory levels by 3% or more, but saves over 85% of the cost of returned inventory. Clearly, this should be addressed by every omnichannel retailer.

Curtis Greve is Vice President of Liquidation and Remarketing for Inmar