Stores that closed during the pandemic continue to reopen and retailers are confronting a number of new issues. Modifying store footprints to maintain social distancing, conducting in-store health checks and expanding normal cleaning procedures are just the beginning. Another challenge is also brewing — customers could arrive with a flood of returns when their local stores reopen for business.
Research from IHL Group forecasts enormous pent-up demand for returns. “We estimated between $150 billion to $250 billion worldwide sitting there waiting to come back,” says IHL President Greg Buzek says.
The financial impacts could go beyond the price of the merchandise. Buzek says only about 40 percent of brands had optimized their return processes before COVID-19, leaving many susceptible to mounting costs. “For apparel there’s labor involved in retagging and cleaning, and other items may need fixing or testing,” he says. New costs are also mounting, such as masks and gloves for workers and enhanced cleaning solutions to sanitize returned products.
“If your processes aren’t optimized, you're losing a great deal on every transaction,” he says, “and it’s coming after the worst time ever for most retailers.”
The uncertainty around COVID-19 exposure risk has led retailers to rethink how best to put returned merchandise back into inventory.
Paper Source, a retailer specializing in stationery, event invitations, cards and crafts, normally has a low return rate. Still, the team carefully assessed processes to keep pace with changes in the shopping environment. Paper Source partnered with Happy Returns long before the outbreak but Kellene Artery, senior store operations manager for the Chicago-based retailer, says they now meet weekly to review procedures and the latest health and safety guidance.
“We've been able to work with Happy Returns to update the process to minimize contact between employees and shoppers, limit cross-contamination and also reduce the time to process returns,” Artery says.
Customers bringing returns into a Paper Source store find sealable poly bags ready to accept their items. Signage leads shoppers through the process to keep things moving quickly and limit interactions. Once products are inside a bag, an associate scans a code to begin the return process and enters the customer’s information into an iPad to make the entire transaction contactless. A reusable tote holds the sealed poly bags and each store is scheduled for a pick-up once they receive 10 items back, Artery says.
Brands are following different paths when it comes to processing returns. Tom Rittman, vice president of marketing at Appriss Retail, says his team’s retail partners largely fall into two camps. Some retailers are not taking any returns now. “Those are the ones who were probably essential retailers and open through the crisis,” he says.
Others are taking a different approach by extending their normal return windows, often because closures limited their ability to process in-store returns. “They want customers to feel comfortable coming into the store again and returning items,” Rittman says. “They don’t want that time limit to disappear and not have the customer interact with their brand.”
Questions still swirl around COVID-19 exposure risks and the uncertainty has led retailers to rethink how best to put returned merchandise back into inventory. One option is to keep incoming stock off the selling floor, either for a “cooling off” period or until sanitization has occurred. Rittman says operational issues may arise from these process changes.
“Retail stores are designed with minimal area for that, so they will have to carve out space and assign labor costs to those activities,” he says. Some brands might choose to send items to a distribution center or larger store with more available space.
“With COVID-19 impacts, we’ve definitely looked at different ways to engage.”
Kellene Artery, Paper Source
Because shoppers have had to find new ways to purchase items as well as return products, retailers are pivoting to keep up with new demands for service and support.
“With COVID-19 impacts, we’ve definitely looked at different ways to engage,” Artery says. “We first connected with several customers through curbside pick-up, which is an option in a large majority of our stores.”
The partnership with Happy Returns has also enabled Paper Source to maintain its focus on service despite any potential jump in return volumes. “It’s another unique experience where we can connect with new customers and give a new service to existing customers,” Artery says.
Buzek says several customer engagement strategies used prior to the pandemic might be useful in today’s environment, too. Refund receipts that include in-store incentives are one option.
“I would expect to see more of that behavior, particularly for retailers that were closed and have now had to mark down a great deal of product to begin with,” Buzek says. “It’s a way of converting a lost sale into a new sale.”