Challenge Tuesday: How to Account for Returns in Your Inventory Planning

Product returns are inevitable for retailers no matter what channel they sell on. Retailers can reduce the likelihood products will be returned by listening to their customers and providing more accurate descriptions, in depth product details, multiple images, and size charts, however, once return season rolls around every retailer has probably experienced the strain returns put on their customer service, warehouse operations, and inventory planning. This weeks Challenge Tuesday will focus on how to account for returns in your inventory planning through out the year and during the return season (post-holiday). 


Challenge: Develop a strategy that will help retailers gain control of their inventory, while avoiding overstocks and reducing missed sales when returns don’t arrive in time to fulfill demand.


Solution: Joe Palzkill from Retail Online Integration first recommends that retailers know their products and know their return rates. Soft goods, such as apparel, tend to have  return rates from 10% to over 30% in women’s fashion apparel. Once retailers separate soft goods from hard goods, distinguish which products will be able to be resold and those that will not. The return rate and reusability rate can help retailers achieve more accurate forecasts by “identifying the products that will fulfill 100 percent of demand (buying overstock to cover anticipated returns) and those that will be purchased below demand forecast (and accept lost sales) to avoid the resulting overstock.”

Palzkill strongly suggests listening to customers to determine why they are returning the item. This will help retailers focus on areas where they can take corrective action and adjust the marketing message to match their customers’ perspective. In the long run, listening and taking action will build stronger relationships with customers. A lost sale is not always a lost customer.

While retailers may not want to totally alter their product mix, retailers may hedge the risk of losing sales and profits by profiling products and adjusting target inventories to focus on those with low return rates.

E-Commerce Inventory Management systems, like SalesWarp, can help retailers easily manage adjustments to inventory thresholds. The system automatically notifies the retailer of new stock updates in real-time across every sales channel as re-sellable inventory is returned to the warehouse. In a scenario where a retailer has not yet received the anticipated returned inventory in-time, specific rules will automatically detect the issue and prevent over-selling and cancellations. Adjusting inventory for post-holiday returns is simple, with the ability to update seasonal inventory thresholds in advance. Retailers are also able to manage RMAs from a single screen, facilitating the exchange, refund and return process, and providing the entire customer service team with access to important order activity.

Have a question about how to adjust inventory with an E-Commerce inventory management system? Let us know and we’d be happy to help!