Retailers’ Olympic-Level Preparation: Essential Strategies for Managing the Holiday Returns Wave

As we think back on the Olympic Games, it’s easy to marvel at the dedication and preparation that athletes pour into their training. That same spirit is found in retail, as the industry gears up for its own kind of Olympics: the holiday season followed by the inevitable surge in product returns.

Returns present a significant logistical and financial burden for retailers, amounting to $743 billion last year alone. They also play an outsized role in overall customer satisfaction, as 64 percent of shoppers will choose a retailer based on their return policy alone. There’s a delicate balance retailers have to strike between keeping their customers happy and protecting their bottom line. Is it possible to do both?

Retail also has its own version of Olympic trials: August’s back-to-school shopping season. In fact, parents who do back-to-school shopping this year were forecast to spend $541 on average on school supplies and clothes. For many retailers, this mini-peak season acts as a dress rehearsal for the end-of-year rush, allowing them to fine-tune their operations and returns practices in time for the holiday season.

Readying the Warehouse

Retailers and brands must ensure their warehouses and third-party logistics (3PL) providers are prepared for peak performance. The most successful operations are the ones that plan and communicate needs early, ensuring they can ramp up processes effectively.

Nowadays, that means having the right technology in place for returns processing well in advance. The tech-enabled warehouse is no longer the future — it's here. And it's especially critical for processing returns quickly and getting them back to stock or to their most profitable channel as efficiently as possible. There are a few key strategies that leading retailers are using to manage returns:

• Data analytics and forecasting: Sophisticated retailers always examine last year’s returns data, return rates, and forecasted sales to predict the volume of returns in the coming months with greater accuracy. This can help retailers prepare for labor and staffing needs and build up their warehouse and store capacity before the peak starts to creep up.
• Robots and co-bots: Co-bots (collaborative robots) have the potential to boost productivity by 2-3x, allowing retailers to scale up with the holiday surge. Uniqlo, for example, uses robots to streamline the sorting and storage of returns in its distribution center. This speeds up the returns process, reduces labor strain, and minimizes the risk of inventory mishandling.
•  Easy-to-learn technology: Warehouses will start hiring seasonal operators soon. It’s important to ramp up the workforce to keep up with increased demand, ensuring processes are quick for both shipping orders and restocking returns to prevent backlogs. Technology can help facilitate faster onboarding for seasonal labor, which can include everything from virtual reality training to machine learning, which helps eliminate guesswork and expedite processes.

Getting the Return Policy Right

While major policy changes aren’t typically holiday-specific, smaller adjustments, such as extending the returns window, are more common during peak season.

Many retailers extend return policies during the holidays, increasing their usual 30-day window to 60 days or even 90 days. This gives shoppers added flexibility and peace of mind, making it easier for them to make gift purchases without worrying about return deadlines.

Target, Walmart, and Best Buy all consistently extend their return windows during the holiday season, allowing customers to return items purchased in November or December until mid-to-late January. This approach fosters goodwill and encourages more confident buying, with the goal of ultimately driving more sales.

Emerging Strategies to Make Returns Better for Shoppers and Businesses

Returns play a pivotal role in shaping the overall customer experience, and the holiday season presents a perfect time to delight loyal shoppers and win a gold medal. By embracing innovative strategies ahead of peak season, retailers can turn the returns process into a powerful tool for fostering customer loyalty, streamlining operations and enabling circularity. Here are a few examples of creative solutions to consider:

• Returns as inventory: This holiday season retailers should optimize their omnichannel network — integrating online, marketplace and third-party channels — and reimagine returns as an inventory source. This way retailers will stretch their inventory to the fullest, directly translating their returns into a readily available inventory pool. For example, retailers like Best Buy leverage their store network as micro-fulfillment centers (MFCs), shipping returned items directly to new customers, eliminating the need for costly reverse logistics.
• Personalized returns offers: The holiday season is an opportune time for retailers to reward their most loyal customers with perks like free return shipping or home pickups, as well as instant refunds. Retailers like Tuckernuck are seeing success with this approach, as healthy returners are 4x more profitable than non-returning customers. Smart technologies leverage data and artificial intelligence to analyze shopping history, segments and more to identify retailers’ best shoppers and cater easy, seamless returns methods accordingly. After all, rewarding your best customers pays dividends. This can be a standout experience for shoppers this holiday season: a true surprise-and-delight.
• Drop-off networks: Top retailers are making it as convenient as ever for shoppers to return items quickly and easily. The faster goods come back, the quicker retailers can restock them, which is especially important for the holidays and seasonal items. However, 35 percent of shoppers struggle to find time to make returns, and 32 percent cite inconvenient returns options as the reason it takes them longer. Convenient drop-offs (like Amazon did with Kohl’s and Whole Foods) as well as home pickups for high-value items and lockers can increase accessibility. There’s an additional benefit to expanding returns solutions: consolidated shipping, which both saves retailers money and reduces carbon emissions associated with the transportation of individual returns.

In retail’s version of the Olympic Games, retailers that take the time to plan and invest in optimized warehouses, flexible return policies, and creative new strategies will earn the highest scores. With the right preparation, retailers can capitalize on peak returns season — turning returns into a competitive advantage and opportunity to exceed customer expectations — securing their place on the podium.

Amena Ali is the CEO of Optoro, a returns management system for retailers and 3PLs.