How retailers can avoid the £2.4bn peak returns crisis

The Christmas peak period is often heralded as the saving grace of retail’s calendar. But any dramatic spike in sales also leads to a marked rise in the number of returned items – and this surge brings a multi-billion pound hangover which haunts UK retail through to January sales and beyond.

There’s no denying that returns cost retailers. Not only do many pay for the return postage, but also factored in is the cost of processing the return through the supply chain, transportation from warehouse to shop and, in most cases, readying the item for resale. At ReBOUND, our research indicates that this surge in returns over peak will impact UK retail sector by £2.4bn.

Under normal circumstances, retailers recoup most of these costs through reselling items. But during the hectic peak period, where the emphasis is on the sale and little else, returns take a back seat. Starting from Black Friday Weekend, the sheer volume generated by peak means that many returns often sit unopened (and off the shelves) until the New Year, at which point they are processed and likely relisted at a discounted rate in the January Sales.

Decreasing resale value and the cost of processing returns will hit fashion retailers particularly hard, as costs often build from cleaning, retagging and reselling stock in January sales. We’ve calculated that the total impact on margins of online fashion returns from Black Friday until Christmas will reach as high as £1.6bn.

By the time we hit 2019, many retailers will likely be delighted at their expected peak revenues, oblivious to the looming returns crisis. Reality hits many during the first days of January, when businesses realise that they now need to contend with a mountain of impending refunds to issue, alongside the task of processing each return and getting it back into circulation. Put simply, as retailers ignore the impact of returns and fail to properly prepare for inbound stock, they’ll continue to leave plenty of cash on the table in the build up to Christmas.

So what can be done to address the peak returns hangover? Fundamentally this is a failure of oversight, as many retailers often aren’t aware of the value of stock being returned to them until they begin opening packages in a warehouse. Investing in data tracking will help retailers understand what is coming back, when it is expected to arrive and – crucially – how much inbound stock is worth. Visibility over this data is key if retailers are to plan ahead and incorporate shorter supply chain turnaround times to return expensive stock to the shelves while customers are still spending in the festive season.

Returns are easier to ignore when you see them as a pile of mystery parcels in the corner of a warehouse. However, any retailer with their eyes on the data will know that neglecting returns over peak comes with significant financial risks. When you know that the mountain of packages in the corner actually represents stock worth hundreds of thousands of pounds, returns become harder to forget.

By Graham Best, CEO at ReBOUND