Home Business The silent risk to Black Friday sales: returns

The silent risk to Black Friday sales: returns

by jcp
gawdo

By Lyndon Hedderly, director, customer solutions, Confluent

You can’t read an online publication or newspaper without being confronted by Black Friday deals or suggestions that this may be the biggest one yet. We were already living in a digital first paradigm before the pandemic hit but, as McKinsey observed last year, “we have vaulted five years forward in consumer and business digital adoption in a matter of around eight weeks”. So, combine that with many consumers looking to get their Christmas present shopping done early due to supply chain issues, and brands have a very real opportunity to deliver and make a revenue impact this Black Friday – and the rest of the Golden Quarter. However, it is not all good news.

Returns, the double edged sword of online shopping

The rise of online sales and shopping has also driven the rise of returns. It is a double edged sword as consumers buying online are likely to send some goods back. This reality of ecommerce returns happens across all industries, with a quarter of all consumers returning between 5% and 15% of the items they buy online.

The impact of this on a business is huge and it hits brands and retailers in three key ways. Firstly, returns raise the cost of fulfilment and logistics across the supply-chain. A return often entails a 100 percent refund to customers and the shipping costs double, as the items need to be picked up, often by courier, resulting in a direct net operating loss. Secondly, lots of critical data supporting the supply-chain, logistics and the buying and returns process, is likely to be scattered across many different platforms including point-of-sale (POS), e-commerce, enterprise resource planning, supply chain and logistics platforms. Lastly, returns impact reported revenue. This is such a problem for retailers that they often now feature it in most annual reports as a key audit statistic. Retailers must make provisions for returns in their financial statements, which can account for around 2-3 percent of revenue.

Taking control with fresh thinking and data

While brands will likely never be able to say goodbye to returns completely – it is part and parcel of the customer experience after all – there are things retailers can do to offer customers the flexibility they demand from returns policies, while also reducing the chance of delays and avoiding financial losses. Key to that is ensuring an efficient returns process.

On top of reviewing the returns policy and potentially adding fitting tools on the website, the critical component to an efficient returns process is data. Retailers also need to apply some fresh thinking to how their data is handled internally and how they can connect all the data they have across different systems – with a platform and infrastructure that sets their data in motion.

Similar to the human body’s nervous system, which coordinates all parts of the body, this infrastructure helps retailers to streamline the returns process by ensuring all data sources across the value chain are directly speaking to one another, and that every time a returns process is triggered, it is shared in real-time. The technology allows an instant link between all of a retailer’s footprints, from e-commerce tools such as content management systems, supply chain and logistics technology, to in-store technology. In addition, retailers could track the delivered item, the returns request online and the courier company pick-up to receiving it at the warehouse. They might even track new data sources, such as the social media sentiment analysis once the return and refund has been processed.

An added bonus on taking this approach to data, is gaining a real-time accurate view of stock as it is returned to the warehouse, allowing businesses to potentially re-offer the product for sale. This helps the retailers update their inventory in real-time, maximising on warehouse space and the supply of high-demand items. This then supports the overall inventory management allowing in-the-moment decisions to be made about the optimal quantities to move, as well as providing customers with inventory visibility to give them the assurance they need to make a purchase.

It is clear that Black Friday, along with the festive season will provide brands and retailers with a massive opportunity to cement or gain customer loyalty, as well as make a huge difference to their bottom line. It is also clear that it presents major pitfalls and opportunities to fail. One of those pitfalls is around managing the returns process effectively. In order to do that, retailers need to build a real-time business with a strong data foundation that has the ability to connect all the various information that is held across their entire business. The time is now for retailers to review and make changes before they find they’ve become irrelevant in the marketplace.

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