Retailers and vendors have always focused on sales as the driving force of their partnership. Conversely, they spent far less time talking about returns management. That made sense at a time when customers shopped primarily in brick-and-mortar stores and returned less than 8-10% of purchases.
However, today, online shoppers return 20% of orders, contributing to a $816 billion industry of surplus items. Retailers and vendors know they must adjust their returns contract terms to match this new reality, but they lack access to the tools needed to re-imagine returns as the lucrative vertical it can be.
Instead, most retailers and vendors operate using outdated contracts with unfavorable terms and manual systems, struggling to handle the onslaught of returns while maintaining a forward sales focus. In the process, they brush up against communication, transparency, and trust challenges that cost millions of dollars in lost profits and productivity.
In the age of exploding returns volume, retailers and vendors need solutions that foster stronger partnerships and higher recoveries. They need intelligent, centralized software laser-focused on decluttering reverse logistics policy management. Fortunately, retailers and vendors can collaborate on the best outcomes for both sides with modern, data-driven tools and transparency.
Top Returns Policy Challenges for Retailers and Vendors { and the Solutions }
1. Lack of Visibility and Accuracy
Seamless communication is one of the most critical aspects of efficient returns management. Retailers and vendors must have clear communication lines open so they can resolve returns authorizations (RA) requests and ship items as quickly as possible to maximize recovery and reduce dead stock. Yet, our experience shows retailers struggle to process returns because they can’t easily collaborate with their partners. Even the most sophisticated enterprises often operate using legacy tools like spreadsheets that are not updated with correct contact information. This leads to significant wasted time and effort searching for details that could be easily accessible with the right technology in place.
Even more consequential than working from incorrect contact details, a lack of transparency carries over into policy terms. So, even if a retailer knows it can return certain items to a vendor for credit, it may lack visibility into the correct logistics provider, packaging instructions, or shipper account–significantly delaying the return to vendor (RTV) process allowing the inventory to age and lose value.
Worse still, retailers may be missing out on returns credit opportunities because they lack visibility to know whether the item is eligible to send back to the vendor. On the flip side, they may accidentally return ineligible items, creating mistrust and administrative headaches on both sides.
Considering that enterprise retailers and vendors manage thousands of partners, this transparency problem can quickly snowball into wasted hours, manpower, and resources.
Returns Technology Solution
Existing vendor management software on the market works incredibly well for forward sales management. Until recently, however, adequate returns policy management tools did not exist.
Fortunately, that’s changing with the advent of centralized platforms that serve as a public ledger for both sides. With such a technology, everyone from account managers, accounting, warehousing, shipping, and receiving can access the same information, making every stakeholder responsible for data accuracy.
Stakeholders can easily analyze RA and RTV rules for every product to determine whether they make sense and if negotiation is in order. Through this shared space, retailers can also upload the latest contracts for every vendor they manage. This allows both sides to review the terms, ensuring the latest agreement is accurate and financially sound based on the current market.
2. Returns Authorization Delays
Challenge
Returns authorizations (RAs) are a vital aspect of many vendor contracts which require retailers to submit requests for inspection before they can ship items back to the vendor for credits. Vendors have historically required RAs from retailers so they could check the data, for a myriad of reasons, prior to accepting the return. However, this process often leads to miscommunication and is one major cause of unnecessary delays on both sides.
Often retailers struggle to process RA requests because they lack convenient access to their vendor contacts, or their contact is so busy they miss out on important communications. As a result, retailers can wait days, weeks, or even months to hear back from a vendor. In the process, an expensive piece of merchandise may sit on a warehouse floor, collecting dust instead of revenue. Plus, even when all the criteria for RA are met, the lengthy process can mean the retailer misses the eligibility period. Unfortunately, this scenario is far too common, and no one’s to blame. RA delays happen because both sides lack a centralized source of truth.
Returns Technology Solution
Today, vendor returns policy management software exists to provide clear, actionable solutions to returns authorization challenges. So, instead of ping-ponging emails back and forth, retailers can log in to the shared platform and submit a push notification to the vendor with their request.
Both sides can then communicate directly through the software, which tracks and records all requests, negotiations, and policy decisions. This ledger keeps both sides accountable for meeting inspection deadlines and ensures retailers only return eligible products to the vendor. Additionally, the software records all RA items' current market value and processing costs, so retailers and vendors can continually re-evaluate policies and contract terms.
3. Inefficient Return to Vendor Terms
Challenge
In conjunction with RAs, return-to-vendor (RTV) terms comprise the most significant portion of retailer and vendors’ returns contracts today. RTV allows retailers to send eligible items back to the vendor or manufacturer for credit–without inspection. Upon receiving RTV items, the vendor typically refurbishes, liquidates, or tosses them away, depending on the item’s condition and potential recovery value. In exchange, the vendor gives the retailer credits for replacements.
RTV is critical because it means retailers can recover value from eligible items that are returned. RTV is equally important for vendors and manufacturers because it allows them to set reasonable limits on what they’ll accept from the retailer.
Retailers and vendors need more customizable policies that factor in RTV processing costs, yet most enterprises operate on one-size-fits-all policies. In other words, an electronics company working with Target might apply the same policy terms to a $20 USB cable as it would to a $2,000 laptop simply because they lack access to intelligent software that can apply different rules for these items.
Returns Technology Solution
Vendor policy portals backed by intelligent returns disposition software provide retailers and vendors with the data they need to make intelligent RTV decisions at the product SKU level. The beauty of this technology is that it allows for meaningful insights based on deep data algorithms that analyze a host of factors, including:
● Product condition
● Resale price
● Inventory level
● Processing costs
● Number of touchpoints required
● Transportation fees
● Storage requirements
After assessing all these factors, returns disposition software can objectively determine if RTV makes the most sense or if a different policy decision could lead to a more profitable outcome. Other disposition options include:
● eCommerce listing
● Refurbishment
● Liquidation
● Parts harvesting
● Recycling
By factoring all returns costs against an items recovery value, this software allows vendors and retailers to reconsider their policy terms on a UPC level, as opposed to category-level. For instance, this software may determine that products below $50 are not worth shipping and processing costs. At the same time, the software may identify an opportunity to resell the product on the secondary market.
Key Improvement Metrics for Retailers and Vendors
By implementing returns policy management technology, retailers and vendors can improve their relationships, reduce administrative headaches and instantly recover more profits, transforming a highly complex process into an opportunity for revenue growth.
● Reduced errors and improved transparency
● Faster RA and RTV processing (up to 70%)
● Reduced chargebacks - potentially saving millions of dollars
● More returns credits and cash flow
● Better, more profitable decisions
● Less stagnant inventory, reducing cycle time by 50% or more
● Reduced transportation costs by eliminating needless shipping
The Bottom Line
Historically, retailers and vendors didn’t have access to best-in-class returns management software. They were doing their best to manage the confusing world of returns, but they lacked the tools to tackle the root cause of inefficiencies. Fortunately, that is all changing as both sides have the opportunity to see the process clearly and collaborate on the most mutually lucrative solutions.
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goTRG’s Returns Management Portal allows retailers and vendors to seamlessly collaborate on returns authorizations and returns management decisions. Retailers and vendors can track every action from a shared, dynamic workspace, driving smarter and more profitable actions every step of the way. Contact our team today to learn more.
