As we approach Q4 of 2020, we decided to do a Newmine Rewind series and republish some of our most visionary content. We’re calling it “Product Returns Reduction: The Time is Now.”
In 2019, retailers still considered returns as a “cost of doing business,” but Newmine spearheaded thought leadership around Returns Reduction, knowing that simply mitigating the costs of returns is insufficient and unsustainable. With the sharp rise of eCommerce due to coronavirus, product returns have risen to an even greater drain on retailers’ bottom lines and are threatening their very survival. This series is a great place to start if you’re looking to familiarize yourself with product returns as well as understand the financial and operational rewards of a persistent returns strategy.
Top Line Shortsightedness
Even before the pandemic, the retail industry was facing mounting challenges: from the struggles of digital transformation, decreasing footfall in physical stores, to financially draining operational inefficiencies. One of the industry’s most costly pitfalls has been the aggressive pursuit of top line growth without proper regard for profit or EBITDA, or what I like to call “Top Line Shortsightedness.”
A thriving top line draws attention and accolades, but it’s the bottom line that pays the rent and keeps the lights on—and you need both to have a sustainable business. True retail transformation can occur when both are working in sync.
As part of our research into how retail businesses can optimize their operational processes, one topic was consistently a concern among our customers: rising customer returns and the associated costs. Retail financial modeling reveals that every $1 M in returns reduction adds $0.5 M back to the bottom line. Which begs the question: Why aren’t retailers reducing returns? What are the obstacles that prevent them from achieving returns reduction?
In 2019, Newmine partnered with the Retail Value Chain Federation to conduct a study on this very topic. The results illuminated the reasons that returns continue to elude retailers, with the key obstacles being:
- Limited resources and access to data: To fully understand the root cause of returns, organizations need access to vast amounts of data and the manpower to take actions based on deep analysis.
- Lack of ownership: There is no one single executive owner of returns.
- Lack of collaboration across organizational silos: Business units rarely, if ever, meet to collaborate on reducing returns.
The first step in solving the returns problem is realizing that it is possible.
In the coming weeks, Newmine will be publishing an eBook titled “Returns Reduction: Your Guide to Taking Action.” Click the link below to receive a copy when it gets released:
Originally published by Newmine’s CEO, Navjit Bhasin, on LinkedIn.
- Nailing Omnichannel in the Pandemic Age: BOSS and BOPIS - September 1, 2020
- Why Aren’t Retailers Able to Reduce Returns? - August 5, 2020
- Why Anomaly Detection is a Strategic Enhancement For Retailers - October 1, 2019