The Underworld of Retail: Returns and Excess Inventory
There are two sides of the retail supply chain. The first is top-of-mind for retailers and customers alike: forward logistics. The goal is to get merchandise to customers as fast as possible, which means retailers invest heavily in technology that streamlines this process. Customers more and more frequently are demanding next-day shipping, so retailers have been partnering with same-day delivery services like UberRUSH and Postmates to get goods to shoppers more quickly than ever. Amazon has pioneered speed and efficiency in the forward supply chain, and its increasingly sophisticated drone technology portends an even faster delivery process in the future.
However, this leaves reverse logistics de-prioritized. Reverse logistics is how companies manage the flow of returned and excess merchandise moving through the supply chain. Despite a demand for fair returns policies, the reverse logistics process isnít necessarily a consumer concern. But for retailers, itís a $1.75 trillion headache.
The reason is simple. Every year, 15% of goods sold are returned back to retailers or deemed excess, and currently many retailers do not have adequate systems in place to manage this flood of items. The traditional reverse supply chain is long and complicated, with goods traveling from consumer, to retailer, to vendor, to a liquidator, to a wholesaler, to a reseller and, finally, to a secondary buyer. Many of these items lose value along the way, and thirty percent of the items donít even make it into the hands of another consumer, ending up in landfills.
The typical long path of a returned item.
Technology Has the Answer
Technology can be the answer for saving time and increasing the efficiency in the reverse logistics process. Take Shyp, for example. This tech start-upís app leverages carrier data to enable customers to compare options and determine the easiest, most affordable way to return their purchases.
Some companies are even building their entire businesses around the growing consumer habit of buying online and returning unwanted items. StitchFix feeds inventory data into an algorithm to send customers five personalized items each month. They are then encouraged to keep what they like and return what they donít. Rent the Runwayís software algorithms keep track of over 65,000 dresses and 25,000 accessories. Their reverse logistics process is so efficient that theyíre able to send out sixty percent of returned dresses the same day they arrive at the warehouse.
My business, Optoro, is helping 20 of the top 100 largest retailers in the US manage their returned and excess inventory. Our software quickly processes this merchandise and gets it directly back to consumers through multiple secondary marketplaces, including our site BLINQ.com. Through advanced technology and data analytics, we are able to increase recovery costs for retailers and keep items out of landfills.
The technology is available, and success stories exist for replication and innovation. Itís time for the broader industry to take notice and add efficient reverse logistics to their priority list.
Tobin is the CEO and Co-Founder of Optoro, one of the fastest growing technology companies in the US. He has been recognized as an Ernst & Young Entrepreneur of the Year and as one of Washington Business Journalís 40 under 40.