Retailers are thinking of doing the unthinkable: keeping your unwanted things rather than returning them due to the catastrophic combination of record fuel prices and an ongoing supply chain problem as reported by CNN.
In recent weeks, some of the biggest store chains, including Target (TGT), Walmart, (WMT) Gap (GPS), American Eagle Outfitters (AEO) and others have reported in their latest earnings calls that they have too much inventory of stuff ranging from workout clothes, spring-time jackets and hoodies to garden furniture and bulky kids’ toys.
It’s costing them tons of money to store it.
So instead of piling returned merchandise onto this growing inventory heap, stores are considering just handing customers their money back and letting them hang onto the stuff they don’t want.
Retailers are stuck with excess inventory of unprecedented levels.
Returned products are handled in a number of different ways, he said.
Selling for less
They can refurbish damaged returns and sell them for less or offload them to liquidators to resell.
They also can sell returned products to foreign liquidators for sale in Europe, Canada or Mexico.
“Given the situation at the ports and the container shortages, sending product overseas isn’t really an option,” said Flickinger.
Lastly, retailers can hire third-party firms to handle all aspects of merchandise returns for them.
Each of these options, however, tack on additional costs for retailers, he said.
“For every dollar in sales, a retailer’s net profit is between a cent to five cents.”
Just keep it
Rop said his company’s clients are 100% considering offering the “keep it” option for returns this year, although he wouldn’t disclose if any of his customers have implemented the “Keep it” returns policy yet.
Walmart said it had nothing to share at this time.
Lowe’s didn’t provide a comment for the story.
“People are tempted to buy a lot to only return it later,” he said.
Refunding customers while simultaneously letting them keep their returns isn’t a new practice, said Rop.
“It started with Amazon several years ago,” he said.
“Other products like kids’ toys, footwear, towels and bedding raise sanitary concerns when it comes to returns.
It could also apply to these categories,” he said.
Concern with cheaper items
Another concern with cheaper items: Stores typically discount returned products, so the amount of money they can make on an inexpensive return is minuscule — and may not be worth the tradeoff, says Keith Daniels, partner with Carl Marks Advisors.
Still, a “keep it” policy has its own disadvantages, namely: Companies will need to ensure that they don’t become victims of fraud.
“One thing retailers need to track and ensure is that customers that become aware of the [Keep it] policy do not begin to abuse it, by seeking free merchandise over a series of orders by getting a refund but getting to keep the merchandise,” said Daniels.
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