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Everything You Need to Know about Reverse Supply Chains

The home furnishings sector is a multibillion-dollar industry that has grown exponentially over the years. Previously, people had to shop for their next couch or dining table in brick-and-mortar stores. Today, many people purchase these items online, and this has resulted in increased sales. However, with every additional item sold online, the potential for a return also jumps higher. Known as reverse supply chains, returns are costly and create a negative impact on the natural world.

Read on to learn more about how returns are affecting the furniture industry and the environment.

How much waste does a reverse supply chain produce?

rubbish-143465_1280According to the Environmental Capital Group, retail returns contribute 2 million tons of waste to landfills annually. This number will continue rising as furniture retailers focus more on targeting omnichannel shoppers—consumers who utilize a variety of means to purchase goods. Omnichannel shoppers not only visit brick-and-mortar stores to shop for products, they also research and make purchases online. A large factor in the spike in online sales is the offer of free shipping. Some retailers also boast free returns. These types of perks, which appeal to millennials and Generation Xers, who online shop the most, are expected to grow e-commerce sales by nearly 16 percent in 2016. This will inevitably increase the number of returns and thus add to the amount of waste in landfills.

Why are so many home furnishings ending up in landfills?

Despite understanding the need to update their marketing and sales approaches to include an online component that reaches younger consumers, furniture retailers have yet to modernize their processes regarding returns. A senior lecturer at the Massachusetts Institute of Technology’s Center for Transportation and Logistics states that the outdated approach is costing retailers significantly, and the industry as a whole is trying to quickly establish solutions. Unfortunately, online sales continue to grow, and consumers are returning more items daily. These items then go through the traditional process of being piled into a warehouse of unwanted goods, where they remain for an extended period of time before being resold or refurbished, recycled for parts, or sent to landfills.

How many returns do retailers receive?

According to a National Retail Federation survey, furniture retailers saw 8.6 percent of sales result in returns in 2013. The following year, returns jumped to 8.89 percent—an industry revenue loss of $280 billion. As more consumers engage in online shopping, the number of returns will continue to rise.

What does this cost retailers?

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Overall, returns can cost retailers between 10 and 20 percent of their profits. These expenses are a combination of the time spent processing returned goods and losing valuable warehouse space to accommodate returned items. The square footage occupied by returned pieces, whether companies use it efficiently or not, reduces the space available to house new products that can generate sales. The unpredictable nature of the furniture market also adds costs because retailers are unable to plan for the number of returns they receive. This challenge makes it difficult to create a process that is sustainable and that limits the transportation of home furnishings to landfills.

Can improving customer service reduce waste and save money?

Yes. Knowing what a customer wants helps retailers sell the product that best fits the customer’s needs, thus reducing the likelihood that the buyer will return it. As such, retailers should implement strategies that help consumers communicate their furniture preferences as well as how they intend to use their intended purchase. For example, stores can draft questions for sales representatives to ask customers as they peruse a showroom.

Online retailers, however, may need to go the extra mile and integrate new technology, such as an online chat program, to ask the same questions. After receiving feedback, the support team member can offer the customer instant recommendations to gauge the consumer’s interest. Based on the customer’s response, the employee can then formulate alternate suggestions. With every response a customer gives, support personnel can tweak their suggestions to better meet the consumer’s requirements. As a result of this process, the store is much more likely to sell a product that meets all of the customer’s needs and thus reduce the likelihood of a return.

Are there other ways to handle returns?

No matter how well a retailer handles product sales, returns are inevitable, and too often these items end up in landfills. To combat growing landfill waste, companies must come up with a process that addresses returns immediately, thus freeing up valuable warehouse space. The best way to do this is with software that can intuitively suggest what to do with a returned item. Suggested solutions should include the option for reselling if a product has the potential to generate revenue. If the company cannot resell the item at a profit, the software should recommend what parts the company can strip from it to sell, recycle, or donate.

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