What is Returns Recommerce?
Recommerce is simply the secondary sale of an item. It’s an item being resold via an ecommerce channel. Recommerce has traditionally consisted of second-hand goods sold through sites such as eBay, Poshmark, ThredUpp, etc.
Returns Recommerce takes it a step further, introducing the concept of selling in-process returns and shipping them directly to the next buyer.
What is the difference between Returns Recommerce and Recommerce?
The biggest difference between recommerce and returns recommerce is in the status of the item itself. Items sold through recommerce channels are typically used goods or a collection of overstock (aged or unpopular items in “new” condition). Examples could include a shirt “with tags attached” that has been in someone’s closet for years. Or retailers liquidating discontinued or out of season items that didn’t sell because they over-ordered.
Returns recommerce on the other hand differs from recommerce in that the items being sold are new-in-box and typically in-season, recent product offerings from a merchant’s catalog. These items are actively being sold on retailer’s online stores and must meet strict return requirements: unworn, unwashed, tags attached, in original packaging, etc. When it comes to product quality, these are tier one goods, driven in part by the returner who is motivated to preserve product quality in order to be refunded on their original purchase.
The growing problem of returns.
In 2021, the average online return rate was over 20%. That’s 1 in 5 items returned. This has a significant impact on retailers and their margins.
“When I handled operations for a retailer in my previous role, we were getting as many as 6-8 pallets a day of returned items. These are items we paid to have shipped back to our warehouse. We paid workers to receive, inspect, and disposition these items. It’s a heavy drain on resources, from the warehouse to customer service.” said Brian Taylor, CEO of Hafback.
Most consumers think these items go right back on the shelf to be resold, but that’s typically not the case. In fact, many returns are thrown away—in the U.S., 6 billion pounds of returned items end up in the landfill annually.
“The unfortunate truth about returns is businesses now have all these additional costs loaded into these items, but they are unsellable through their primary sales channel. The products themselves are usually in great condition, most being returned for buyer’s remorse or fit issues, but the packaging is too damaged to meet customer expectations for a “new” item. Liquidation is an option for some retailers but can often be more work than it’s worth when you’re recovering pennies on the dollar. So, items get donated or thrown away in order to avoid a bottleneck in your warehouse”
How does Returns Recommerce benefit retailers?
Returns Recommerce is a direct response to the growing returns problem.
By eliminating the need to send products back to retailer’s warehouses, you cut out the reverse logistics costs and issues of deadstock inventory (inventory that is unsellable).
The resulting savings enable retailers to discount returns recommerce listings heavily. This incentivizes secondary customers often resulting in quicker sales. To top it off, instead of recovering $0.10 through liquidation, they can recover $0.50-$0.70 on the dollar even after a 30%-50% markdown. It’s truly a win-win for retailers and customers.
Both sides also benefit from the inventory turnover speed, with customers getting the latest product offerings and retailers not receiving returned inventory that is now out of season. With a traditional returns process, items can be out of sellable inventory for 4-6 weeks (or more) and then they sit on the shelf and wait for the next sales opportunity.
For retailers, there are several other benefits to selling through a returns recommerce marketplace.
- Offer free returns by swapping “returns shipping” for “outbound shipping” to a new customer. Many retailers can’t afford to offer free shipping, but with returns recommerce they can.
- Additional customer acquisitions channel. Roughly 70% of recommerce shoppers are new to brand, and a third will return to purchase a full priced item directly from their site.
Returns Recommerce and Sustainability
The traditional online returns process has a dark side that is often overlooked. It’s negatively impacting the environment. Shipping items back to retailers generates 15 million metric tons of CO2 annually and introduces billions of additional touch points, each with their own carbon footprint. Add to this the fact that all of this impact is often for naught when items get thrown away.
With a comprehensive returns recommerce solution like Hafback, that utilizes a peer-to-peer shipping model, you get the ability to shorten that product journey, and put that product directly in the hands of the end user. This keeps the product out of the landfill and eliminates an entire logistics leg from the equation.
Returns Recommerce and Returns Management
Returns recommerce fills a critical void that a traditional returns management system does not address: The logistics and physical handling of the product itself.
Utilizing a returns management software allows you to provide your customers with a self-serve returns portal, automate the handling of consumer return requests, and to collect data behind product returns. There are many great returns management software solutions to choose from and utilizing one of these will help you streamline this back office process. However, you are still on the hook for the cost to ship and process the returned item as well as trying to find a channel to clear this stock out of your warehouse, whether that be through donation, liquidation, or disposal.
When you add a returns recommerce solution, you give your business the most optimized channel for eliminating the burden, both economic and environmental, created by shipping and handling returns. This is possible due to the fact that returns recommerce sits at the top of the returns funnel, before any other action in your reverse logistics process occurs.
Is Hafback’s Returns Recommerce Right For My Business?
Would your business benefit from an immediate pickup to the bottom line? How about streamlining an operational process? If yes, then returns recommerce would be a great compliment to your business.
Let’s take a newly launched DTC store that experiences 5 returns a month. And we’ll assume an average unit sales price of $75. The average cost to retailers to process a return is as high as 66% of the retail price. That includes freight and warehouse processing costs as well as losses on liquidation. At $49.50 on each item, that’s a ~$3,000 bottom line impact on an annual basis.
Whether you are doing 5 returns a month or 5,000 returns the impact is immediate and noticeable.
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