The chaotic mix of record fuel prices and an unending supply chain crisis have retailers considering the unthinkable: Instead of returning your unwanted items, just keep them.
In recent weeks, some of the biggest store chains, including Target (TGT), Walmart, (WMT) Gap (GPS), American Eagle Outfitters (AEO), and others have reported in their latest earnings calls that they have too much inventory of stuff ranging from workout clothes, spring-time jackets, and hoodies to garden furniture and bulky kids’ toys. It’s costing them tons of money to store it.
Now add on to that glut another category of product that stores have to deal with: returns.
So instead of piling returned merchandise onto this growing inventory heap, stores are considering just handing customers their money back and letting them hang onto the stuff they don’t want.
“It would be a smart strategic initiative,” said Burt Flickinger, retail expert and managing director of retail consultancy Strategic Resource Group. “Retailers are stuck with excess inventory of unprecedented levels. They can’t afford to take back even more of it.”
Returned products are handled in several different ways, he said. Retailers take back merchandise from the customer, evaluate it, and if it’s in good condition put it back on the shelf at the same or lesser price.
They can refurbish damaged returns and sell them for less or offload them to liquidators to resell. They also can sell returned products to foreign liquidators for sale in Europe, Canada, or Mexico.
“Given the situation at the ports and the container shortages, sending product overseas isn’t an option,” said Flickinger. Lastly, retailers can hire third-party firms to handle all aspects of merchandise returns for them.