Commentary

OPINION: Why retailers need a sustainable option for excess stock

Having clear, sustainable policies for dealing with returned or excess stock is a must-have for retailers and brands in today’s market, according to Giorgio Vitale, head of EMEA, B-Stock

Just as consumer demand leads the course of product development, it also guides the course of product disposal. Today, consumers are likely to spend more money with their favourite retailers if those retailers sell second-hand apparel or have an environmentally conscious way of dealing with returned and excess stock. As it turns out, the practice of landfilling or destroying inventory in an attempt to protect brand integrity is actually detrimental to brand reputation by today’s standards.

As a result, brands are opting for more sustainable practices to handle returned and excess stock—to increase positive brand recognition and loyalty—and also implementing these processes to fit in with new legislation being introduced worldwide which bans retailers from sending overstock to waste.

Meeting consumer expectations

With consumer expectations of sustainability and new legislation worldwide, retailers globally are being pushed to become more environmentally friendly. This means they need to consider the avenues in place to reduce overstock inventory sustainably. The problem is, overstocked warehouses are not conducive for profits, and landfill is not an option for reputation. Retailers are searching for sustainable strategies to effectively address excess inventory and maintain a strong brand presence—while minimising financial loss.

The key challenge for retailers is a vast majority are unable to calculate the unit economics of returns, including expected return levels, markdown liability and the varying return rates by the product. Employing alternate disposition channels (i.e. Resell after refurbishing or repair, Return-to-Vendor, Recycling and Dispose-to-landfill) might compromise an already dented return-economics. Unfortunately several retailers occasionally find it easier and less expensive to dispose damaged returned goods which then end up in landfill, somewhere in the world.

Automation of the returns process will undoubtedly reduce the time taken to route returned goods back into the resale channel, thereby facilitating re-commerce.

E-commerce is here to stay and with that we must recognise the impact on volume of returns – every online purchase is twice more likely to be returned than in-store purchases. Retailers, therefore, should take advantage of planning and prediction tools to understand their customers and sell the best items to meet their needs.

What’s more, customers hate complexity and seek retailers offering convenience. Adoption of best-practice tools and technologies can hand retailers the visibility to plan and design return processes that delight customers whilst keeping costs down.

Making use of data 

Data leveraged in real time has the power to transform retail. With a combination of predictive analytics and intelligent technologies, we can reduce waste going to landfill, drive re-commerce, fend off depreciation and boost revenue, so a cost becomes an opportunity.

The sustainability goal posts continue to shift for retailers. It’s no longer just about the sustainability of retail operations. It’s increasingly about the sustainability of retail supply chains from beginning to end.

There are many innovative and profitable solutions emerging as retailers expand their sustainability focus beyond their own operations and seek new sustainability opportunities within their supply chains.

The future of retail sustainability will be efficient operational design and the implementation of sustainable supply chains for both inbound, outbound and reverse logistics.

 Written by Giorgio Vitale, head of EMEA, B-Stock

 

Image credits:
  • Shutterstock

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