The holiday season is an exciting time in retail. Once Black Friday rolls around, it can be a whirlwind of hectic jubilation straight through the end of the year.
The experienced retailer, however, knows that this joyous time of gifting comes with a curse: returns. And when the flood starts, you'll want to have a Shopify returns management strategy in place.
Consumers are willing to spend a lot. The National Retail Federation (NRF) projected that the average American would spend about $1050 on gifts, treats, and travel for the holidays by the time the dust of credit card statements settles.
Holiday sales, overall, rose more than 3% in 2019 over 2018. In particular, online spending for the holidays increased nearly 20% in just one year. The most wonderful time of the year, indeed!
The holiday sales season is the harbinger of an absolute surge in returns.
The phenomenon is so well-recognized that UPS has designated January 2nd as National Returns Day due to the extreme volume it encounters on this day.
And UPS predicted that they alone would handle nearly 2 million returns on January 2nd of 2020, which would be an increase of over 25% from 2019.
One of our core values is to give retailers the technology and data they need to take a proactive stance on returns and deliver a customer experience on par with Amazon and Wal-Mart.
Since around 30% of holiday sales are expected to come back as returns, it is not something we can merely forget about until the decorations come up next year.
We wanted to make a list (and check it twice🎅🏼🎄) to ease the affliction of holiday returns.
Whether or not you decide that a returns management software is the right solution for you, it is imperative to have a structured process implemented before your next influx of returns.
As many of us (present company included) have learned from trying to accomplish all our holiday gift shopping the day before, this is not the time to get a returns workflow in place.
And for reference, here are some guiding philosophies on returns and the fundamental components of a returns management process.
Returns are a lagging metric. They follow the purchases from which they originate. We know orders were placed and we know that returns will occur, so we can anticipate the volume on incoming returns.
Using the volume of sales and a retailer’s typical return rate, we can forecast the volume of returns a retailer is likely to see from products it has already sold. A nice little heads up before a return is ever created.
We can also track the statuses of returns as they make their way to your warehouse or 3PL. This means you can see how many units are in transit or waiting to be processed at any given time.
This information is good to know since some of our retailers were met with a pretty substantial uptick in returns reaching “In-Transit" status in the days after the holiday.
For one of our retailers, December 27th saw nearly twice as many returns “In-Transit" as the average day of 2019.
And the 31st topped that by nearly tripling the 2019 daily average of returns reaching “In-Transit" status.
Retailers can use these reports to staff their warehouse and better prepare for the flood of returns. These are just some of the operational reports we can craft with our retailers to advance their returns process.
There is not much we can do to prevent returns from this holiday season. But the returns themselves carry valuable lessons to extract for the future.
Gather your team and ask the questions:
Perhaps the description on the website needs some adjustment. Return reasons and comments can illuminate both product and description issues to reduce unnecessary returns in the future.
Returns will still happen, but you can identify and alleviate customer’s common difficulties.
Once you isolate and correct causes for returns, you can observe patterns around exchanges. What products are being exchanged? And what products are being received in exchanges?
These patterns allow us to see how customers are treating the return on their end. Are shoppers simply selecting a different product variant, or opting for a different product altogether?
Once a returned product arrives at your warehouse or 3PL, its value to you depends on its condition.
An important, and often overlooked data point of any returned item is its disposition.
The product disposition classifies the state of the product according to the retailer and determines what will become of that product.
The resale, liquidation, and wholesale ecosphere is in many ways the last frontier of ecommerce. The principle remains: the way you handle returned products can either lose or retain 15% to 40% of sales revenue.
Most retailers intuitively recognize that some returned products are fine and are ready for resale, while others are in some way damaged and cannot be restocked.
But the difference is made in intermediary dispositions, and appropriate classification based on the condition of the product.
Dispositions to reflect products that are just below “A” grade such as “dirty” or “minor damage” can help salvage a great deal of money from returned products that would otherwise be discarded.
For one of our retailers, nearly 25% of units returned in 2019 were marked as an intermediary disposition. This equates to over $250,000 of sold merchandise.
Your Shopify returns management strategy needs to quickly restock inventory that is ready for resale.
Properly categorizing returned products based on their condition is the first step to recoup the value of these products.
The hustle and bustle of the holiday sales season has come to an end. But returns season has only begun.
It's never too late to improve your Shopify returns management and take proactive steps to optimize returns in the future. Start your journey by downloading our free “Return Optimization Checklist: 7 Best Practices to Reduce Your Return Rate."