Whether you sell online or in-store, returns are an inevitable cost in the retail industry. And they can be tricky – they can increase rapidly, aggressively cut into profit margins and cause logistics issues.
According to a recent study, the overall value of returned merchandise in the US during the past year was $309 billion, with online purchases accounting for $41 billion of that total. Now, the COVID-19 pandemic has complicated the issue of returns even more.
While it is an increasing problem, how retailers deal with returns can help differentiate them from competitors, reduce return costs, and even make them more profitable.
Along with higher return rates, the pandemic has exacerbated certain return challenges and created new ones altogether, for example:
Given the challenges associated with returning products to stores, retailers are having to offer extended return windows.
Increased health and safety policies require stores to set aside returned merchandise for 24 hours to reduce COVID-19 transmission. For some retailers, thorough steam cleaning has become a popular sanitation measure.
Retailers must find additional retail space and assign labour costs to their sanitation processes.
Retailers face higher consumer expectations when it comes to the efficiency of the return process and free online returns. However, the pandemic has caused reduced staffing across warehouses, delaying return processes for many stores.
Understaffed stores must find additional resources to restock returned merchandise back on the sales floor.
The overhead associated with receiving and repacking merchandise for resale along with the disposal of unsaleable merchandise is increasingly cutting into profit margins.
The good news is that retailers can take a number of steps to both reduce return rates and make the overall process more efficient and less costly.
How to Reduce the Cost of Returns
1. Clearly communicate your pre-purchasereturn policy
Establishing standard operating procedures for handling returns will make the process more efficient and less costly for your business.
Aclearly communicated return policy will enable you to treat each return the same so you can avoid treating requests on a case by case basis. Processing every return manually can be expensive and overwhelm your staff, ultimately preventing you from scaling your business.
While policies are going to vary depending on the industry and the type of retailer, every policy should include certain elements. To find out more about writing a return policy and the basics you should cover, click here.
Once you have written up your policy, you need to make sure that customers see it before they buy. This means including links to your policy in hard to miss places on your website or e-commerce site, and near checkout tills in your physical stores. Clearly outlining your return policy will help set the right expectations before purchase, reducing hours spent on customer service.
2. Accurate online product information
If you’re selling online, one way to reduce the likelihood of returns is by providing your customers with accurate product information. Depending on the type of merchandise that you sell, this could mean in-depth size guides, diagrams, or photos that clearly showcase the appearance of your products. Doing so will give your customers a better idea of what they are purchasing and they’ll end up more satisfied with their decision.
Make sure that the information you provide on a certain page pertains to that particular product, category, and brand. For example, you don’t want to provide clothing size guides on a footwear product page.
If you sell internationally, it’s suggested that you include links to international conversion charts or images of such charts on product pages as well as both metric and imperial measurements.
Retailers with physical stores may also want to provide the same product information in-store, especially if COVID-19 has impacted a customer’s ability to interact with products (e.g. if changing rooms are closed).
3. Customer reviews
Featuring customer reviews and ratings on your website can play an important role in reducing returns. In fact, online reviews carry a lot of weight during a consumer’s path to purchase. According to Google, 88% of shoppers say they trust online reviews as much as personal recommendations.
Giving shoppers access to helpful, relevant reviews can give them a better understanding of the products they are considering and can help set expectations about functionality, quality, and usability. And by learning about others’ experiences with the product, shoppers can easily discern if it is right for them.
Customer reviews are a way for merchants to have a finger on the pulse of their business as they provide valuable shopper feedback that can be used to proactively reduce returns. For instance, reviews provide important insight about customer preferences (e.g. what type of shopper buys certain products and how they use them) as well as product flaws. Store owners should constantly be analyzing and reading customer feedback to identify ways that they can improve product quality and services.
Some retailers even use reviews to make important purchasing decisions – e.g. the number of inventory items that should be bought, whether or not to continue selling certain products etc. If specific products have an overwhelming amount of negative reviews, it is time to review the products or work with the supplier.
4. Use technology to optimize the handling of returned items
Many traditional retailers aren’t using systems designed to handle online returns which have increased a lot due to the recent boost in online shopping.
For many, the issue is managing returns once they reach a retail store or shipping facility. Most traditional stores are still new to handling online returns which can include everything from where to put inventory back into stock to processing refunds for online sales in-store. And returns can get even more complicated with multi-location retailers selling on different online channels.
For example, processing returns manually will require a lot more staff hours than returns handled by a system that properly restocks returned products based on the order status. This is a flaw with many retail sales systems as the focus is often on selling as many items as possible, and less thought is put into how to handle costly back office processes such as returns which can really cut into profit margins when not managed effectively.
While some systems will utilize 3rd party apps to manage returns, a complete retail platform will include built-in return features such as:
Return Control Settings such as requiring receipts for returns, requiring return reasons that are tracked by users or a separate return screen to minimize the potential for employee theft.
User Access Controls for Returns such as restricting access to return functions.
In-Store Refunds for Online Sales at the physical location where returned products are actually inspected prior to refunds.
Omnichannel Stock Control that puts returned products back into available stock in all online sales channels and at the location where they are returned immediately once the return order is finalized.
Besides making the process smoother for shoppers, directing returns to physical stores helps retailers save on:
1) The cost of packing materials and staff time to pack orders securely.
2) The shipping fees of returns which are commonly expected by shoppers today with online returns yet doubles the shipping costs for merchants.
3) The cost of damages or lost packages during transit. Even if a merchant has insurance, there are administrative costs to making constant claims.
4) The cost of compensating unhappy customers with additional or future discounts when shipments or refunds are delayed.
5) The higher payment fees charged by processors for online refunds vs. PCI compliant in-person refunds with EMV PIN pads.
But more importantly, returns in-store are more likely to increase the chance of converting a potential refund into an exchange, or even better, a larger sale if the shopper buys more than the original order.
In this way, even though returns can be costly, they can also be a way for a retailer to really differentiate and highlight their customer service. After all, according to Metapack:
92% of customers who receive a good return experience make repeat purchases
So optimizing how you handle returns can be a chance to interact with customers, provide them with a great shopping experience, and capture their loyalty for the long-term.
6. Offer buy online, pickup in-store (BOPIS)
While there have been innovative strides taken in the retail industry to bridge the online and brick & mortar experience, even the best technology cannot replicate the in-store environment where customers can see and interact with products in person.
Oftentimes, returns are a result of customers not liking the product or the product not fitting properly. This can be reduced by providing a way for customers to touch or see the product in person before an order is complete. The ideal way to do this is with BOPIS which is also known as Click & Collect in some industries. For shoppers, it provides a convenient way for them to buy as well as return their purchases.
By offering a Buy Online Pickup In-store option, retailers provide their shoppers the convenience of online shopping with the interactive experience of purchasing in-store. And, of course, during the pandemic, this is a safer way for shoppers to buy yet still check their orders before taking them home.
Since the pandemic started this year, BOPIS orders are 275 percent higher than pre-COVID-19, even after stores reopened from lockdowns. Now that shoppers have been using store pickup for an extended period of time, studies show that consumers are unlikely to stop using BOPIS, even after the pandemic. This means that retailers need to find cost-effective ways to offer the service permanently with an omnichannel store system that can handle both sales and returns effectively based on the way people shop today.
Dealing with product returns is never fun, especially now with the complications brought on by COVID-19. However, when properly dealt with, retailers have the opportunity to minimize and even capitalize on returns. We hope our article outlined some of the ways to do so.
What are you doing to minimize returns in-store? Let us know in the comment section below.
According to the National Retail Federation, losses due to organized retail crime, theft, and vendor fraud, etc. have continued to grow over the past few years. In 2019, shrinkage reached $61.7 billion, up from $50.6 billion in 2018.
Now the COVID-19 pandemic has created new challenges for retailers when it comes to loss prevention.
History has shown that retail theft increases after global events that have major economic impact. Following events such as 9/11 and the financial crisis of 2008, there was a notable increase in shoplifting.
Retail experts are predicting that COVID-19 could lead to even greater increases in retail crime as factors such as unemployment, uncertainty, and financial pressure make people more likely to steal and purchase stolen goods. Additionally, thieves are likely to take advantage of masking policies to get away with shoplifting and organized retail crime.
Let’s take a look at how retail owners can mitigate the risk of increased retail theft post-pandemic.
Post-COVID-19 loss prevention tips
Limit the number of shoppers in-store
Limiting the amount of shoppers allowed inside at a given time will prevent your retail store from becoming too crowded. Not only is this an important health & safety measure post-COVID-19, it is also critical in deterring retail theft.
A limited number of shoppers in-store will make it easier for staff to spot any suspicious activity. Remember, alert employees are the best defense against shoplifters. Attentive customer service and eye contact are key. Thieves hate attention and are less likely to act if they are in plain sight of store employees. So, if employees suspect a shopper is likely to commit a crime, teach them to engage the shopper in conversation.
Since many retailers have had to decrease the number of staff per shift to accommodate social distancing guidelines, limiting shoppers in store will also help to ensure adequate staff oversight. This way, store owners can be confident that there are enough employees keeping an eye on the sales floor.
Use cameras and mirrors
No matter how alert you and your employees are, it’s difficult to constantly monitor what is going on in your store. This is why security cameras, mirrors, and closed-circuit television cameras are great assets. When you are busy assisting shoppers or if you get momentarily distracted, video surveillance ensures that you are still covered in case of a crime or theft. And with retail theft expected to rise and a limited amount of staff allowed per shift post-COVID-19, you may want to consider installing more cameras and mirrors. It can be as simple as wifi cameras with recording functions or advanced AI surveillance software such as NoLeak Defense which uses technology to flag when a person’s body language is suspicious.
For smaller retailers, mirrors are a cost effective way to make a significant impact for both monitoring and deterrence. It’s a good idea to place them in the “blind spots” and corners of your store. This will make it easier for staff to see the whole store and at the same time, can make the perceived size of your store bigger.
Signage to prevent theft
Another cost-effective way to minimize opportunities for thieves to steal is the use of signage. Similar to how an at-home security system would deter burglars, anti-theft signs can act as a means to ward off potential retail crime.
Here are a few best practices when it comes to maximizing the impact of loss-prevention signage:
Place signs near your storefront or your front door to make it clear that your retail store is being monitored. This is often the first place that shoppers look and helps to minimize any privacy concerns.
Make sure your signage is placed high up where shoplifters would look for cameras/mirrors.
Consider featuring a set of eyes or list the consequences of committing retail crime (fines, jail time etc.) on the signage. Research has shown that this increases the likelihood of compliance.
Go cashless for security
Unfortunately a significant amount of shrinkage is internal. After all, employees are more likely to understand how your operations work and how products or money can be taken without being noticed. And so, with the increase in shoplifting, experts are also predicting a spike in employee theft post-pandemic.
If you accept cash, you won’t be able to run your retail business without giving employees access to your cash drawer. At the same time, balancing your cash drawer every day is time consuming. In the words of small business expert Michael Philippou, “take away cash and you take away the problem”. If it is necessary for you to accept cash, it’s important for you to use a retail POS system that has proper cash management and “cashout” controls including payment breakdown by tender type, the ability to hide system or +/- figures, etc. These types of functions will make it more difficult for employees to adjust closing figures as only users with the higher access rights would be able to see the comparisons.
To reduce the risk of internal theft, you should consider joining other retailers in going cashless, even if only temporarily. Yes there are costs associated with electronic payments but when you consider the risks in terms of employee theft and the extra administration costs, it is likely more cost-effective for you to go cashless. COVID-19 has only increased the risks and is the key reason why many retailers (and even government support such EBT programs) are increasingly digital these days. And if you are a fast-moving retailer, taking integrated electronic payments with your POS can also help increase your sales as you can significantly increase your checkout speed and accuracy.
Use a unified retail software
Before the pandemic, many merchants looked at “omnichannel,” “harmonized” or “unified” retail as a nice-to-have. Since the pandemic started, retailers are now looking at omnichannel as a must-have. So what do all of these terms actually mean?
While the terms have slight differences, they basically refer to a single system or piece of software that allows you to connect all of your inventory and customer data from all sales channels. So whether you make a sale online or in-store, you can track every order, payment, refund or inventory change in one software. Separate or poorly linked systems make it much harder for store managers to know how much inventory there is. Naturally, this creates opportunities for would-be thieves to more easily steal products – as nobody will notice that system quantities don’t match what’s available until they actually check what’s in stock!
While it’s possible for traditional POS software to offer some of these functions, a cloud-based system will be much better at handling this as the data in a true cloud system is managed in a central database online. This is particularly true if you manage inventory over multiple physical locations within one or many stores. During uncertain times, the flexibility and accessibility of cloud-based systems from anywhere makes it a lot easier for store managers and owners to:
More easily identify and trace suspicious activity all from a single system
Know what total inventory is in-stock vs. available to sell across all of your locations and sales channels.
Have better visibility into all transactions and inventory activity from wherever they are working (e.g. when they are working from home)
Have proper employee controls based on their access rights regardless of what device they are using and wherever they log in (e.g. no more remote access!)
Revise your store layout
There is a lot to consider when it comes to retail design in a post-pandemic environment. Retailers need to re-organize their store layouts to help shoppers and employees feel safe and comfortable. But at the same time, their store design and set up needs to be organized in the best possible way to prevent theft.
Below are some tips to consider when revising your store layout post-COVID-19:
Place shelves and displays 6 ft. apart so employees have maximum visibility. This also helps to ensure compliance with social distancing guidelines.
Have elevated sales counters for better staff visibility of the shop floor.
Place small high-touch and high-value items near the checkout counter or in locked displays.
Install mirrors and cameras to eliminate blind spots.
Make sure there is adequate lighting in all areas.
Avoid large or clustered displays by reducing your selection. Many retailers including mainstream grocery stores are doing this now as fewer SKUs means less re-stocking and better visibility on suspicious behaviour.
Keep your store organized; a disorganized store attracts shoplifters and makes it easier for them to operate.
Install sensors that notify you when shoppers enter or exit the store. This is particularly important if you are trying to control the number shoppers in your store to maintain social distancing.
Have an employee stationed near the front of the store to greet customers as they enter and exit the store. Make sure that this employee is trained to handle customers with mask-related issues or to explain your store safety policies, etc. Personable, engaged employees help deter would-be thieves who are more likely to target stores where they can enter and leave undetected.
Partner with law enforcement
Working closely with law enforcement is a key factor in the fight against organized retail crime and theft. In the U.S., many federal, state, and local governments have established agencies that work with retailers to combat organized retail crime. To find out more about ORC associations in Canada, click here.
It’s a good idea to contact your local police station or retail association for advice on how to report organized retail crime, shoplifting, and internal theft in your area. Authorities can redirect you to local community resources and even provide important loss prevention tips.
Prepare your employees
With post-pandemic employee fraud expected to increase, retailers need to take preventive action. Besides some of the payment and system options mentioned earlier, here a few others steps that retailers can take to protect against internal shrinkage:
Send a clear message to all employees that detecting fraud is still a priority and will not slip under the radar. With sales down, layoffs and the addition of preventive health & safety measures, some employees may sense the company’s attention is elsewhere and believe there is an opportunity for theft.
Fraud training for senior employees, visible management of anti-fraud efforts, and the promotion of transparency should still be a priority for retail owners and managers.
Do random inventory counts. It is not necessary to check the entire store – many stores often do partial counts by section – but make sure that the counts are unscheduled so that employees cannot anticipate them.
Increase POS data analysis and auditing frequency to be familiar with employee activity and be alert to possible fraud activity when there are unusual patterns.
Use a modern POS system to make it easier to manage discrepancies in inventory and have a clear overview of your entire business across all locations and sales channels.
Ensure your POS system has strong user permissions. These permissions allow store owners and managers to restrict staff members from accessing certain features (such as sales reports and refunds without receipts, etc.).
Run background checks when hiring new employees.
Ensure employees are well trained to prevent accidental loss. Whether it’s entering inventory incorrectly or entering the wrong discount, accidental losses can add up. A POS system with built-in training tools can help ensure that your employees are well-trained on store policies and procedures.
We hope you found this article useful.
If you are a Toronto retailer, you can also download the following PDF for step-by-step instructions on how to report a retail crime.
Inventory shrinkage (loss of inventory due to employee theft, shoplifting, vendor fraud etc.) continues to be a serious issue for retailers – both large and small.
In fact, according to the 2019 National Security Survey, industry-wide shrinkage was estimated to be $50.6 billion. Thus highlighting the importance of having a loss prevention plan.
So, to help you establish a plan of your own, we’ve put together some tried and tested tips and strategies. Check them out below!
What is retail loss prevention?
The loss associated with shrink is two-fold; you’re losing your initial investment in the merchandise itself as well as the revenue that the product could have generated with sales. This doesn’t even include reduced customer satisfaction due to stock-outs.
Which is why store owners should consider retail loss prevention to be a priority. Loss prevention can be defined as a set of best practices that a retailer should follow to prevent product and profit loss.
In order to better understand how to prevent product loss, you must understand what causes it and how those losses occur.
As outlined above, the number one cause of inventory shrinkage is shoplifting. Shoplifting can take many forms, whether it’s an individual acting alone and stealing one or two items or it’s a serious case of organized retail crime where thousands of dollars worth of merchandise is stolen.
Whatever the case may be, it’s important to take necessary precautions so you can lessen the chances of shoplifting taking place in your retail store.
The following are some merchandising best practices that can help deter physical theft:
Merchandising best practices
a) Use effective signage: Make it clear to potential thieves that your store is being monitored. Hang signs around your store warning shoppers that they are under surveillance. Or alternatively, you can use signage to remind them of the consequences of committing theft.
b) Cameras: It’s good practice to place cameras by POS terminals, the entrance/exit to your store, and by any loading/delivery areas. To beef up your security even more, you can also consider hiring security staff.
c) Mirrors: Smaller retailers may not have the resources to install cameras in every corner of their store or have their employees constantly monitor the aisles. For theses retailers, mirrors are a cost effective option to make a significant impact when it comes to loss prevention. Placing mirrors in key areas and corners of your retail space will allow one or two employees to easily monitor the whole store. It also helps your store look more spacious.
d) Revise your store layout: Thieves are less likely to act when they are in plain sight of store employees. This is why it’s a good idea to organize your store layout so that employees have maximum visibility – avoid tall shelves and clustering product displays together. Also, consider placing valuable merchandise closer to staff or in locked displays.
e) Keep your store organized: An organized store is key to deterring theft as well as encouraging shoppers to buy. Keeping your store organized will also make it easier for staff to identify missing product. On the other hand, a disorganized store makes it easier for thieves to operate and can even play a part in attracting them.
2) Use RFID technology
A radio frequency identification system (RFID) is an advanced technology system used by larger retailers to improve inventory management and protect against shrinkage. It is particularly effective against internal theft and administrative errors as RFID tags are harder to manipulate.
RFID chips contain inventory information and are embedded in product tags or packages. This then lets store owners track product information in real-time. They are especially useful for retailers who are omnichannel as RFID provides item level visibility so you can track merchandise from distribution to sale.
While RFID technology has traditionally been too expensive for small retailers, the cost continues to fall as more and more retailers are using them. In some cases, the cost has fallen below $0.05 per tag. While this may still be too high (especially when you add the labor cost of applying tags), depending on your volume (which may allow you to request your supplier to apply them) or the value of your products, it may still be more cost-effective than any losses you would incur as a result of shoplifting.
Many POS systems give retailers the ability to create different staff accounts and set user permissions. These permissions allow store owners and managers to restrict staff members from accessing certain features in the POS system. Put simply, user permissions are ways for business owners to limit employees from performing tasks outside of their job description and to prevent internal theft.
Depending on the size of your business, you will want to be able to customize the type of rights different employees have access to. If you have a lot of staff or have turnover due to seasonality, you’ll want to look for POS systems that allow you to easily group employees by different customizable roles. In this way, you can easily set the access rights for a role (e.g. cashier) and then simply assign any employee to this role without having to manually set up the rights for each person.
4) Manage refunds and returns
Fraudulent returns (returning used, stolen, exchanged merchandise or returning merchandise with counterfeit receipts/money) happen frequently in retail. And while return fraud is harder to assess than shoplifting, a strict return policy can help prevent it from occurring in the first place.
Here are a few tips for developing a practical return and exchange policy that minimizes the risk of internal and external theft:
Require the original receipt for all returns and make sure the store’s return policy is printed clearly on all receipts. Most POS systems will allow you to customize receipts to include important important information such as store policy, contact info, and social media.
Make sure employees are strict about enforcing the store return policy. Consider placing a written version close to your checkout tills. It’s also a good idea to have employees remind shoppers of the policy at checkout.
Require customer ID to process refunds and exchanges and train staff to spot fraudulent returns.
Consider offering refunds only in the payment method used to make the purchase. While there is a processing cost to allowing refunds on credit cards, it is a lot easier for savvy users to process fake returns if it is possible for them to refund using cash. After all, it’s as simple as reprinting a receipt, processing a return and pocketing the cash themselves.
Look for a POS system that gives you the option to accept returns with a separate return screen that forces users to associate a refund to past invoices.
We hope you found this article helpful.
If you are a Toronto retailer, you can download the following whitepaper for emergency situations.
A SKU (pronounced “skew”) stands for Stock Keeping Unit and is used by retailers to both identify inventory and keep track of inventory movement.
It is basically a unique combination of numbers and letters assigned to each product in a retail store. As a retail owner, SKUs give all of your products a single type of code to help you keep track of certain details for a specific product including price, product information (colour, size, features, etc.), quantity, and manufacturer. SKUs are often associated with vendors or supplier barcodes but can they can also be converted into scannable barcodes and printed on to product labels.
A retail POS system is the software that holds all of this inventory information so that you can track what you’re buying, how much stock you’re carrying and whether stock movement matches what you’ve sold. Whenever you’re looking for a new retail POS system make sure to check if the software will allow you to use your existing SKUs and also generate consecutive SKUs for new products. This is particularly important if you integrate to other non-POS systems (e.g. accounting systems) based on your SKU names.
SKUs vs GTINs
SKUs should not be mistaken for Global Trade Item Numbers (GTINs) or Universal Product Codes (or UPCs). SKUs are internal codes used for products that are unique to a retail business. On the other hand, GTINs or UPCs are the same for a product – no matter who/what store sells it.
How are SKUs Made?
Each retail store has a unique and specific process in place for choosing SKUs. This method is usually easy to understand and follow for retail staff.
POS systems can help you create SKU codes based on a format that works for your business. For example, your SKU code can have a specific prefix or suffix together with a number that increases consecutively. For example, a SKU for your business might be FD-2340-GR. Others use shortcodes within their SKUs as an easy hint to staff so they don’t need to memorize numbers.
How are SKUs used?
Inventory management: Inventory/stock-takes should be done at regular intervals in retail; both for tax purposes and to ensure accurate inventory levels.
When each product is assigned a unique SKU, inventory availability is easier to determine throughout the year. And when it comes time for a stock-take, SKUs make it easier to reconcile stock levels – so that actual inventory levels match inventory counts in your retail POS or inventory management system.
Stock replenishment: Making use of SKUs can help store owners identify reorder points and a minimum threshold – so when inventory hits a certain level, they are made aware that a new purchase order needs to be placed.
These internal codes also help you identify the products that move faster. Meaning you only have to re-order when you really need to – resulting in reduced inventory holding costs.
Better customer experience: Have you ever walked into a store and seen a pair of shoes or a t-shirt that you liked – but it turned out that you needed a different size? In this case, retail employees usually scan the item’s barcode or label to see if they have your size in stock, either in the back stockroom or at a different location.
This instance explains how SKUs are used within a retail system to improve customer experience. When products share a traceable type of code, you and your staff can more easily identify stock levels quickly so that more time is available to actually assist customers.
Identify profitable stock: SKUs are generally the easiest way for retailers to filter for specific and detailed product reporting – e.g. identifying best sellers and underperforming products by their SKU. When you combine this with merchandising and product categories or tags, business owners can more easily see the effectiveness of their store’s product mix.
Identify inventory shrinkage: Inventory shrinkage in retail can be defined as the discrepancy that exists between the inventory quantity in a retailer’s POS system and the actual inventory in that store. In other words, it consists of the stock/product/inventory that goes missing due to human error, theft, damage, miscounting etc.
And properly designed and implemented SKUs are central to any good inventory management system. They are key to modern digital retail since they are necessary to share and track inventory information between different locations, systems, and sales channels.
Did you find this article helpful?
We will be posting more inventory management tips in the upcoming weeks.