How Can Recommerce Benefit Your Supply Chain?
Priorities for global commerce and consumerism continue to evolve, and retail companies are turning to recommerce to reduce their carbon footprint while managing the cost of returns.
Recommerce is a fast-growing service focused on reselling problem inventory to extract value from existing products and reduce the environmental impact of manufacturing and transportation.
Companies spend an estimated $100 billion a year on cross-border returns. Currently, cross-border sellers see a return rate of up to 30% on all online purchases; resulting in substantial costs, logistics and sustainability challenges.
The returns phenomenon is relatively new, and COVID has amplified the weaknesses of the reverse logistics flow because returns have not been treated as an opportunity. In the past, brands have thought that there is no money in returns, so they've tried to execute at the lowest possible cost, which typically gives the wrong people the wrong tools and generates ineffective targeting.
One of the most common sources of problem inventory comes in the form of ecommerce returns, particularly cross-border ecommerce returns. Compared to traditional methods of managing ecommerce returns, recommerce delivers benefits in commercial, environmental, and operational areas.
Recommerce reduces the timeframe in which returns are managed which, in turn, boosts cash flow. By comparison, the standard approach views returns as a cost center, rather than a revenue opportunity.
The recommerce approach reduces cross-border returns by utilizing in-country resale channels so businesses can drive down storage and freight charges.
Brands can emphasize their positive environmental impact with a recommerce strategy that emphasizes two critical aspects of sustainability—the longevity of a product and the carbon footprint it leaves behind. Recommerce gives products more than one life and more than one buyer. Some brands are encouraging secondary sales in recognition of growing consumer emphasis on sustainability.
The recent rise in recommerce is just beginning, and it is going to become an integral element of the retail market and the global supply chain.
Providing Quantifiable Financial Benefits
With the transformation across ecommerce and within the global supply chain, clear operational changes are required to address certain outdated practices. Retailers have trained consumers to expect fast and free delivery, but in reality, there's no such thing as free.
- Operationally, customer practices were founded on the idea that there was no money in problem stock, and brands didn't invest in it or understand—it was treated as a "rear-view mirror" problem. The process of cross-border returns has been founded on a lack of awareness, a lack of data, and a lack of process.
- An effective strategy helps retailers identify high-value items that should be consigned to recommerce, and which items justify a cross-border return. For example, in fashion and apparel, top-selling shirts are flown back to the point of origin, and lower-value items are left in the original location or moved to another marketplace where they can be resold at a lower price point.
- A recommerce solution builds operational proficiency because of the data it provides through a product grading system. Each item is assigned an attribute map, which provides consistent data that can be applied across different locations so retailers can compare the process and outcomes consistently, allowing for better business decision-making.