The Reason Stores Are Getting Christmas Returns Back On Shelves Fast

A product bought online is more likely to be returned than one bought in a store. And as ecommerce volume continues to rise versus in-store purchases, merchants are trying to optimize the value of their inventory in order to increase sales and margins.

Pandemic-related shortages have created an opportunity to generate value which will carry over as the economy adjusts. JL

Sarah Nassauer reports in the Wall Street Journal:

More retailers are working to quickly get like-new returned items back into their systems for sale. They are hoping to fill shelves and websites, as supply-chain snarls limit the availability of some new inventory, and reduce the cost of handling returns overall, a bigger expense in recent years as e-commerce sales climb. Retailers such as Walmart are investing in automation, software and new warehouse systems that cut the time for returned products to become salable inventory. “We have used the pandemic to maximize the value of inventory.”

Find what you needed this year? It might be because you got someone else’s return.

More retailers are working to quickly get like-new returned items back into their systems for sale. They are hoping to fill shelves and websites, as supply-chain snarls limit the availability of some new inventory, and reduce the cost of handling returns overall, a bigger expense in recent years as e-commerce sales climb.

A product sold online is more likely to be returned than one purchased in a store where a shopper can see and touch it first.

Retailers such as Walmart Inc. WMT 1.06% and American Eagle Outfitters Inc. AEO -1.75% are investing in automation, software and new warehouse systems that help cut the time it takes for returned products to become salable inventory.

American Eagle focused on streamlining returns last year after the pandemic shut down stores, the company’s main return channel, said Shekar Natarajan, chief supply-chain officer for the Pittsburgh-based apparel chain. That strategy has paid off, as supply-chain problems this year delayed shipments of some of the company’s bestselling products, such as jeans and leggings, said Mr. Natarajan.

“We have used the pandemic to try to maximize the value of the inventory,” said Mr. Natarajan.

Retailers like Walmart are investing in automation, software and new warehouse systems that help cut the time it takes for returned products to become salable inventory.

PHOTO: BRANDON BELL/GETTY IMAGES

The company set up more warehouses to receive, clean and repackage returns, he said, and employed new technology to gauge product demand to determine in advance which warehouse should process a return and which items are worth fast-tracking back onto shelves.

For example, American Eagle gives priority to leggings, which have been harder to import because of manufacturing delays in Vietnam, said Mr. Natarajan. Returning a product to shelves, depending on its priority status, now takes the chain six days or less, down from about 14 days before, and costs around half as much, he said. Company executives said they were well stocked for the holidays during an earnings call in November.

Overall, the volume of returned holiday goods is expected to rise this year, in line with sales, but not as fast as last holiday season when buying shifted rapidly online during the pandemic, say retailers and firms that handle returns for them. Some data show that more shoppers returned to stores for holiday shopping this year, helping to lighten the return load.

A lack of inventory to meet demand has been a problem for some retailers in recent months, especially smaller ones that don’t have the resources to work around logjams that chains like Walmart or Target Corp. do.

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Gap Inc. GPS -1.40% took a sales hit of around $300 million in the most recent quarter because supply-chain disruptions led to a lack of inventory, the company said last month. The apparel retailer has focused on more efficiently processing returns for years, a spokesman said, but accelerated those efforts during the pandemic when e-commerce sales surged and physical stores closed.

In March the company added new automation that helps return products to “in stock” within an hour of arrival at a warehouse, he said, versus a couple of days with the previously manual process.

Some data show returns linked to holiday purchases are happening earlier this year after many retailers kicked off their holiday deals season in early October.

GXO Logistics Inc., a Greenwich, Conn.-based supply chain and warehousing company that handles returns for several large retailers, saw the volume of returned goods surge in November for some e-commerce categories, a spokesman said. At one large electronics retailer, return volume for November rose 46% from a year earlier, he said. At a large apparel brand, returns rose 36% this November compared with last.

Such figures are in line with e-commerce trends. Online sales rose in October and early November, compared with the same period last year, then fell in late November and early December, according to data from Adobe Inc. October e-commerce sales rose 8% to $72.4 billion and November e-commerce sales rose 13.6% to $114 billion.

Walmart, the country’s largest retailer by revenue, has been returning more like-new items to shelves as well as looking for ways to sell gently used products, a spokeswoman said.

Walmart already sells refurbished electronics on its website but is now selling those products in some stores as part of a test, she said, both to become more efficient and help reach the company’s sustainability goals.

Before the pandemic, many retailers aimed to get shoppers to return items at physical stores so they would buy more, said Amit Sharma, chief executive of Narvar Inc., a technology firm that manages returns for retailers and brands that sell directly to consumers. Now many are focused on convenience, efficiency and faster return processing, he said.

Narvar is testing a service in 10 large cities that lets retailers, including Brooks Brothers and Crocs Inc., offer to pick up shoppers’ returns to get those items back to warehouses faster, said Mr. Sharma. Traditionally “people initiate the return online but still take a few days or up to a week to drop off that item in a store or at UPS, ” he said. Return volume at Narvar during November and December so far is up about 5% over last year.

In the past, returns were an afterthought, “just a last thing to be processed, and it takes a while to get back to in-stock or just goes to close out sale,” said Tobin Moore, chief executive officer of Optoro Inc. The logistics technology company counts American Eagle, Target and Best Buy Co. as clients.

“With the supply chain issues, we’ve been working with them to see returns as part of their inventory,” he said.