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Are Your Stores Ready for Online Returns?

Home Depot recently reported that 90% of online order returns are received at the stores.  As online sales continue to grow so will returns of online orders to the stores as the Home Depot experience highlights.  If not properly planned for, these returns have the potential to depress overall margins, degrade the brand image and increase customer frgkchartjustration.

Effective planning for online order returns needs to involve more than just store ops and supply chain.  It needs to include buyers, planners, allocators, and visual merchandisers, and be part of the merchandise financial planning process.  5 key factors can help minimize the negative impacts of online order returns on margins, inventory, brand and customer experience.

  1. Common item numbers/UPC’s for on-line and brick and mortar SKU’s – With more and more returned items showing up in the store, and potentially offered for sale, it’s imperative to know what’s selling and for how much – the use of ‘dummy’ SKU’s in the store just won’t give the detail and transparency into what’s selling and what’s not and may lead to inordinate amounts of trapped inventory
  2. Fact based up-to-date assumptions on returns % and realized margins in the merchandise planning process – Historical in-store return rates will not reflect current customer behavior.  Social media is full of stories of shoppers buying multiple items, not sure of what they really wanted, and then returning the unwanted items.  Return rates need to be monitored and planning assumptions updated continuously, potentially at lower level in the merchandise hierarchy than historically managed
  3. Straightforward in-store return procedures for online orders – As part of the overall shopping experience, a returns process that respects the customer and is handled quickly provides another opportunity to build and reinforce a long-term relationship.  Telling her that the return can only be processed in a certain location or by a certain person, or requiring extraordinary documentation creates a transactional mindset and does little to build long-term loyalty.
  4. Detailed policies for what returns stay in the store, and what gets moved out, back to the DC – With a much larger assortment online there is a high chance that returned items will not be part of the regular store assortment, or even relevant to the local market.  Irrelevant merchandise raises inventory costs, increases markdowns and takes up space.  Yet at the same time the costs to ship an item to another location can represent a significant expense.   A careful balance needs to be stuck and managed at the item/style level in many cases.
  5. Clear merchandising policies for returned items that stay in the store – Just putting everything into a clearance area conditions customers to hunt for discounts first and diminishes the visual presentation and degrades the brand.  Returned merchandise needs to seamlessly blend into the overall visual display.  Markdown cadences need to be adhered to and potentially accelerated when an item is not in the regular assortment.

Returns represents an important opportunity to interact and build a relationship with customers.  As online sales and returns grows, proper planning will be key to maintaining the customer relationship, company profitability and brand image.



McMillanDoolittle is a premier international retail consultancy bringing deep experience with world class clients. Our partners have extensive experience interpreting the retail marketplace and converting insights into successful strategies. We help clients develop innovative solutions in strategy development, the customer experience, new concepts, brand performance, retail performance improvement and retail intelligence services.

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