Merchandising: Reducing Inventory Costs by Reselling What's Returned

I know what you're thinking already. Reselling returned merchandise sounds like you're going to sell a stained shirt that was worn to a wedding in Florida during the middle of summer.

Of course you wouldn't do that, but are you as savvy as you can be when dealing with returned merchandise?

One retailer I worked with had $140,000 in returned and damaged merchandise sitting in the warehouse and the chain of stores. One of the biggest issues we found was that customers were returning merchandise and employees were simply placing it in the "returned" bins, regardless of its condition. Even brand new merchandise that wasn't used was placed in the bins because it was returned. So we developed a process to get the damaged and returned merchandise destroyed in the field or back to our warehouse so we could take the credits.

THE REAL WORLD RETAILING TAKEAWAY
Two major areas of emphasis exist as it deals with this issue.

1. Create a return policy
2. Create a process to get as much credit from vendors as possible for merchandise returns

Return Policy
In today's retailing world, you need to be lenient with your return policy by always giving the customer the benefit of the doubt. But there are a few ways to protect yourself.

1. You set the policy - clearly have it stated on receipts and on a sign at your cash wrap.
2. Make sure your policy spells out the time frame for returns and what the customer will receive. For small retailers, a window of 30 days is reasonable for returns where cash will be given. After 30 days, it's fair to offer store credit. You'll always run into the customer that returns something after 30 days and expects cash. Use your judgment and if they don't accept the store credit, then offer cash to keep them happy.

Merchandise Returns
Always always always be open-minded when it comes to merchandise returns. The key is to inspect the merchandise thoroughly. If it's unopened, then chances are it hasn't been used. However, many items don't come in packages so inspect them thoroughly for use. Are the tags still on the clothing? Does the item appear soiled or stained anywhere? On clothing, are the fold lines gone? There are a lot of ways to determine whether an item has been used or not so think about how you can tell based on the items you're selling. If after inspection, the item appears unused and you can resell it, then give the customer their cash or store credit and make sure the item is keyed back in your inventory and immediately put out on the shelves. This is critical so I'm going to say it again-- get the item back into inventory and on the shelves.

If the item is opened and used (like a consumable product) then it isn't sellable. You can and should have a return bin in the back where these items go. Just have a plan to go through the bin once a month.

So how do you get your money back for items that are returned but cannot be resold? You have two choices here.

1. Check with your vendors. They sometimes offer a discount for returns - a line item appears your invoices (it may be a 1or 2% of purchases discount). Sometimes it's standard but if you don't see it, then ask. I live by the mantra that if you don't ask, you don't get.
2. Vendors may offer a credit for returned goods -- just pack up and return the used goods to them (you pay for shipping). They receive the goods and check them in and then they issue a credit on your next purchase order. Again, you have to ask the vendor what their policy is.

Make returns to vendors a priority when working with new vendors. Ask what their policy is and get it into the agreement with the vendor before placing your first order.

What else are you doing to ensure you're getting the most from your customer returns?