Reverse Logistics in the Fashion Retail Industry
The fashion retail industry experienced a disappointing year end: overall retail sales volumes in December dropped 2% while high street retail giants such as Next, Primark, Debenhams, and M&S reported lower-than-expected-earnings. On top of this, January brought with it a flood of product returns: relaxed return policies and the increase in online spending lead UK consumers to send or bring back one in three purchases. Between the excess inventory and returns, retailers have been left with billions of pounds in merchandise that must be accounted for. This trend, and the growing cost associated with it, creates a new urgency for retailers to rethink their reverse logistics processes; this is especially important when it comes to the merchandise that cannot be returned to store or virtual shelves and is slated for liquidation. Having a proper liquidation solution in place is vital – especially one that recoups the highest amount possible for the merchandise.
If you’ve historically sold your inventory to one or two brokers your recovery value will remain low because it’s in brokers nature to negotiate prices down in order to maximize their own profits. What’s more, time spent negotiating deals for every lot of merchandise you have to sell takes you away from core, strategic activities.
A more preferable solution is to leverage a web-based platform. This makes it possible to have thousands of buyers compete for your inventory, pushing prices up instead of a single buyer negotiating them down. This type of solution could include launching your own online liquidation marketplace – one that can be customized, integrated and scaled based on your inventory needs, or by leveraging an established business-to-business online auction marketplace that caters directly to thousands of liquidation buyers.
Consider this example: a large e-retailer was experiencing higher volumes of customer returns due to explosive and rapid growth in primary sales. The inventory was being sold to a small group of buyers for a pre-negotiated price. As the amount of merchandise grew, so did the need for more buyers. By launching a custom B2B online liquidation marketplace the online retailer made its inventory accessible to thousands of new business buyers who were able to bid directly on it via competitive auctions. By implementing this solution, recovery rates were boosted by more than 30% despite a 138% increase in inventory volume. What’s more, this platform allowed the e-retailer to offload most all of the operational work associated with selling the inventory while accelerating the cash cycle, and improving the company’s reverse logistics processes overall.
Consumers are fickle and retailers must be ready for varying levels of returns and in some cases, excess inventory woes. An efficient, recovery-generating reverse logistics and liquidation process is a must in today’s competitive retail landscape; it can mean the difference between failure and success.