Return Management Tips For Wholesalers
As a wholesaler, the post-holiday season is probably the tail-end of your busiest period in the year. In addition to tallying your post-holiday sales and getting over all the festivities, you need to deal with returns from your retail customers. Here, we’ll share some tips and tricks from our experience dealing with wholesale returns.
Having a returns policy is a must in the wholesaling business. Retail customers want to be assured that they can return any unsold stock within the terms of the sale agreement. An offering a particularly generous returns policy means that retailers can shift the risk back to you, the wholesaler, when any stock goes unsold.
Remember, offering a transparent and generous returns policy is a competitive advantage that differentiates you from other wholesalers.
Why Do Wholesale Returns Happen?
Firstly, let’s cover the various reasons why wholesalers have to deal with returned goods. Depending on the terms of sale, retailers are entitled to return unsold stock back to wholesalers. Retail customers are, in effect, shifting the risk back to the wholesaler who now has to deal with pallets of unsold but new stock.
Pro Tip: Wholesale returns are inevitable. Accept and quickly deal with them.
1. Inaccurate Forecasting
From our experience, inaccurate forecasting is the number one reason for wholesale returns. Retailers purchase stock from you in the hope of reselling them for a profit. However, it’s hard to predict sales or popularity of products before the shopping season with any degree of accuracy. Even the best-laid plans can run awry.
2. Poor Quality Products
A close second is faulty or poorly designed products. When a product quickly garners a following of 1-star reviews online, you can be sure that retail sales for that product will be hit. And slowing or zero sales mean a high rate of return for the product. One good reason is that the product simply doesn’t perform as advertised or expected.
Just think of non-stick pans, for example. They are essential in just about every kitchen for crepes and egg recipes. However, if food starts to stick to pans advertised as non-stick, customers will get irate. Alternatively, the non-stick treatment or coating may start to visibly peel off or drop in performance over time.
Number three is simply obsolescence. For clothing and shoes, the quickly shifting winds of fashion can dictate that certain colors, designs or shapes are no longer “in”. For electronic goods, the relentless march of technology means that your shiny new product can quickly become so last season with the passing of each quarter.
4. Expiry Dates
In fourth place is expiring products. This is particularly so during the festive season when foodstuffs have a quickly approaching expiry date. Festive goods are typically manufactured and stocked months in advance. And when that date passes, goods begin a countdown to spoilage. Suddenly, it isn’t cool to consume holiday things, such as fruitcake, mincemeat pies, and mulled wine.
Seasonal factors make it to the fifth place on our list. Similar to obsolescence, the changes in season make it impractical or uncool to have certain products. Just think of artificial Christmas trees and holiday lights and you get the idea. Also, unusually hot weather during winter can dry up warm weather clothing sales quicker than a heater.
Finally, a remote reason for wholesale returns is damage to stock. This is usually due to whipsaw weather conditions and Acts of God that cannot be reasonably anticipated. Depending on whether you’re in the north or south hemisphere, floods, sub-zero temperature, and fires can damage stock stored in a warehouse. Other reasons include improper handling and employee sabotage.
How Do You Handle Returns?
If you’re already using sophisticated inventory management software like EMERGE App, the returns process is made easier for you. If you’re using some other software, spreadsheets or paper records, then you may have to do extra steps to handle the return of products back to specific warehouses and sections.
Pro Tip: Good inventory management software will effortlessly deal with returns involving batches and multiple warehouse locations.
In EMERGE App, go to the Exchange and Return in the Fulfilment module.
Click on New Exchange and Return and select the shipment number that the goods were sold from. Then pick the product in the shipment along with the location and section that you wish to return the goods back to.
If the returned goods are part of a batch, then you can select the batch number here. This is a real time saver when you’re dealing with the return of expiring foodstuffs or medicine. You don’t need to hunt and peck for the batch number of each returned product. This is critical for regulatory reasons if the products are returned due to a recall or health advisory.
Best of all, the inventory levels will be automatically adjusted at the select warehouses. You can verify this in the Inventory List Report or Inventory Movement Report.
What Next For Returned Goods?
Now that you used your spiffy software to handle the returns process of goods back to your warehouses, what should you do next with these returned goods? At EMERGE App, we’re advocates of the view that your business needs to be nimble. Move your stock fast and make it quick. In other words, cut your losses and just move on.
From our experience dealing with the unsold stock of t-shirts, there’s very little point in trying to maximize or squeeze any residual value left in your returned stock. Whatever value they had, in the beginning, was expended at the retailers. You now have returned stock sitting in expensive warehouse space. And there’s a real risk they will become deadstock.
Pro Tip: The quicker you get returned stock off your hands and out of your warehouses, the better.
There are a couple of options here to deal with returned stock.
1. Dispose of Them
Firstly, you can simply dispose of them. This probably the most controversial and painful way. And it’s best reserved for returned goods that have expired or are no longer salvageable. There’s very little you can do with rotten foodstuffs or medicine past their used-by date. The best course of action here would be to pay to have them disposed of.
Pro Tip: Disposal is best left for a stock that are damaged or expired beyond saleable condition.
- Very quick and easy.
- Immediate clearance of returned stock.
- The returned stock is completely written off.
- Fees are charged for collection and disposal.
2. Liquidate Them
Secondly, you can sell returned stock to liquidators. These are buyers who specialize in buying customer return pallets. They understandably buy in bulk and they’ll give you cents in the dollar for whatever stock they think they can remarket or sell. Also, they will “cherry pick” the best stock and leave the rest behind. Liquidators are at an advantage here and they know it.
Pro Tip: Liquidators will pay for freight from your warehouse to theirs. Consider these savings when you weigh up disposal versus liquidating.
- Fairly quick and easy once terms are agreed upon.
- Liquidators pay for shipping to their warehouse.
- Electronic goods attract a lot of interest from liquidators.
- Liquidators will offer cents in the dollar for returned stock.
- Buyers will pick and choose whatever stock they think can sell.
- You may still be stuck with unsold, unattractive stock.
3. Sell Them
Thirdly, you might take things in your own hands and hold a direct-from-warehouse sale. Sale terms should be cash-only to save on any further transactions costs. Ideally, buyers will cash-and-carry your stock. And you want to bundle stock so that they can be sold in bulk, but in manageable portions. However, you may not be able to clear all your returned stock unless you hold a fire sale in the last few days.
- Selling costs are low.
- You’re in complete control of how you dispose of your stock.
- You can dictate, within reasonable limits, the price for your returned stock.
- You will get more per dollar compared with liquidators.
- You’ll need staff to handle sales, marketing, and cash collection.
- Warehouse sales may not suit certain goods or those that are bulky.
- You may still be left with unsold, returned stock.
What Can You Do To Minimize Wholesale Returns?
Unfortunately, as a wholesaler, there’s not a lot you can do to minimize or reduce returns from retailers. It’s part and parcel of the wholesale-retail relationship that retailers expect to be able to return unsold stock. It’s all part of the risk-shifting strategy. Plus, having a fair returns policy means that retailers are more likely to buy from you than from your competitors.
One thing that you can do, however, is to start from the beginning and take a good, hard look at your product catalog. Go through your returns records and identify the goods that have the most returns. This method may not be useful if you see consistent returns across the board. But if there are spikes or anomalies for a certain product, you can zero in on the product to find out why.
The various reasons for returns will be exactly the same as the ones covered earlier.
1. Improve Faulty Products
For faulty products or those that don’t work as advertised, you should go back to the manufacturer and show them honest feedback. Weak parts or poor quality materials may bring down a product. Ask them to put the product through its paces themselves and explain how it’s impacting their brand. It may require a product rethink or redesign.
2. Avoid Obsolescence
For products that face obsolescence through technology, fashion or seasonal changes, do more homework when sourcing for these product categories next time. Electronics are particularly tricky and their supply and demand move along with Internet sentiment. For fashion, perhaps it’s better not to put all your eggs into one thematic or faddish basket.
3. Minimize Seasonal Stock
For seasonal changes, the ebb and flow of weather are beyond your control. Winters may see warmer weather or precipitous drops in temperature elsewhere. Likewise, summers may be particularly wet or ferociously chilly. Stocking up quantities in anticipation of stable weather patterns may not be a good idea in this era of extreme climate change.
4. Improve Shelf Life
For expiring foodstuffs, you could perhaps reconfigure your product catalog to carry more wholesale goods that don’t require refrigeration. For example, opt for frozen produce over chilled ones for longer shelf life. Or wine and bottled drinks over fresh juices. Some goods that previously required refrigeration can now be stored at room temperature, for example, vacuum-packed noodles.
Handling returns are all part of the wholesaling business. While you cannot get rid of it completely, you can take steps to reduce or minimize wholesale returns from your retail customers. Rather than focus on returns management efficiency, take a good look at your product catalog to identify items with a high rate of return. Then take steps to reduce their returns by improving the product or switching to another one.