Creative Channel Retail Insights
As retail begins to open up and shoppers slowly start to return to stores, we will continue to see a Brick & Mortar retail sales increase, and with that growth, will be an increase in returns as well. Our data shows that retail stores are recording more negative Net Sales than they have in the past, as historically online shopping has a significantly higher return rate vs. in-store shopping. As a result, Inventory Valuations by Asset-based lenders for used/returned inventory are getting severely discounted. All of this points to a surging problem.
Safety is a significant priority in the current COVID-19 climate, and shoppers are becoming increasingly concerned with open-box items and products previously taken into another home. The CDC is currently looking at establishing guidelines for product returns in certain product categories. Even as these guidelines come into place, the reality for most brands and retailers is that their used inventory value will become distressed inventory, requiring significant markdowns.
As a brand, how are you preparing for this?
Over the past 6-8 weeks, with stores shutdown or operating in a curbside-only model, shoppers have been buying products sight unseen, either online or via curbside pickup. Sales originating in this model typically have return rates that run 2x to 3x higher than in-store purchases. Most retailers have extended their return windows and have become more flexible in their return policies, creating a momentary benefit for customers, but setting up what we expect is going to become a growing liability for both parties.
Retailers who have accepted returns typically have a quarantine area where the products are placed for a multi-day waiting period. Some are trying to disinfect these products proactively to make them available as open-box stock or new stock (if unopened). The open questions include:
What should be done with these returns?
Will consumers want them?
Are there disclosure guidelines that are now needed?
We believe that the best solution to help reduce this risk is to make sure customers walk out with the right product.
Within the new Covid-19 environment, managing returns and consumer expectations are becoming even more critical for brands and retailers as stores open up. Our shopper research indicates that consumers would still prefer to come into stores to see, decide and purchase a product. For those who are concerned or are unable to get a scheduled appointment, the best alternative for brands and retailers is to offer virtual appointments.
As our Xpert Teams are readying to get back into store, we are prototyping virtual appointment solutions and will be scaling the model to reach a high volume of consumers.
We welcome your perspective! How prepared are you for this as you look at your plans for the rest of 2020?