A Look at Customer Returns for the Wholesale Retailer

There are some purchases that just don’t make the cut. The product makes it home and for some reason, the customer’s love for it has waned. A trip back to the store, a few minutes haggling with customer service and the item is now a customer return. But, now what? Does it just go back on the shelf? Does it get thrown away? The world of customer returns is a murky one, and for wholesale retailers a small increase in clarity can equate to a huge payoff.
Customers return products for two major reasons: the product is defective or a taste change has occurred. There are serial returners: people who return products after benefiting from ownership—a real headache for retailers. Most large store chains are cutting this type of behavior with customer returns databases linked to driver’s license numbers. Other shoppers are the “Undeciders.” These customers can’t decide on a particular aspect of a product, so they purchase a variety of colors or styles, take them home, and return what doesn’t work out. The last group of customers though, makes up the pool of upstanding consumers. Products are returned only when they are broken or a taste change is tempered by also purchasing a replacement product from the same company.
Trying to find concrete numbers on customer returns is an impossible feat. But don’t deceive yourself to thinking they don’t exist. On the contrary, most major manufacturer and suppliers now implement sophisticated software and database applications to track customer returns. Integrated cash registers, high speed networks, and tailored computer applications have slowed the turnaround time for customer return data to a mere 48-72 hours after a product is returned. In turn, these sophisticated return processing systems have shortened the time it takes from a product’s return to it’s liquidation on the wholesale market.
Most legitimate claims of broken or nonfunctioning products are handled differently from taste change returns. When possible, the returned product is sent back to the manufacturer to be “refurbished.” This means the product, usually an appliance, is tested, has parts replaced or repaired, tested again, and then made available for another consumer. It is expected that a small percentage of products will be damaged on the path from manufacturing floor to store to customer’s home. In some cases, to protect brand perceptions, a factory refurbished appliance or item will be relabeled with a completely different name. Frequently relabeled products are still sold to liquidators and wholesalers for distribution, but occasionally they are marketed as new products at first-cycle retail stores.
Taste change customer returns, or nonfunctioning products beyond repair, are sold in bulk to liquidation and wholesale dealers. These are typically labeled as “customer returns” by wholesale traders, and contain at worst a small percentage of truly broken or damaged merchandise. The wholesale price discount and ability to generate a profit on the resale of the items usually far outweigh this small risk. Online purchases are further increasing the ratio of true taste change versus damaged merchandise. More shoppers each year are making purchases through online retailers, or online outlets of familiar stores. But, with only photographs of a product available at best, more and more products are delivered that do not quite live up to the expectations at purchase. This is a huge boon for wholesale retailers, because it further increases the products in near pristine condition available for purchase and resale.
In today’s retail markets, manufacturers and suppliers actually take customer returns, factory refurbishing, and wholesale or liquidation costs into consideration on a product’s bottom line long before a product is even advertised. No longer is the wholesale business dependent upon junk products, or even severely outdated products. As companies are keener to track customer satisfaction through customer returns data, wholesale retailers will directly benefit. The ever shortening customer return cycle means consumers of all budget constraints can acquire the same quality goods, just at different stores. The smart wholesale retailer knows how to use the growth in customer returns to his or her advantage, and don’t forget, that could include you!