Process Spotlight: Cost-Effectively Managing Apparel Returns

Six tips for lowering reverse logistics costs with apparel returns

Jim Sharkey
May 14, 2024
returned bridesmaid dresses

One of the greatest commercial challenges apparel brands face is managing the significant costs involved in returns.

On top of the cost of fulfilling an item and having to pay for the return of that item, costs are compounded by the lag between purchase and restock - retailers are unable to sell the returned inventory until the item is returned to stock. Most brands feel that a higher conversion rate and high customer lifetime value make the cost of returns worthwhile, so they accept this as a costly but important component of their business. 

The good news is that there are several strategic steps brands can take to make this process less painful and lower the cost of processing returns.

1. Use a Return Merchandise Authorization (RMA)

A return merchandise authorization (RMA) is a helpful way for brands to make their returns processing much more efficient. First off, an RMA lets the 3PL know how many returns are expected - and this is especially true when coupled with a tracking number. Giving the 3PL a barcode allows the 3PL’s returns operator to instantly pull the details of the return and the items being returned, greatly increasing both the processing speed and accuracy of the return process. 

The RMA also allows a brand to accurately sync the processed return with their ERP system to ensure they have accurate data on return costs. These data help ensure not only that financial reports are accurate, but also that the brand can leverage the data to derive insights to help lower return rates.

(More importantly, it also gives your 3PL the ability to prioritize returns based on items that are out-of-stock - something that directly increases your brand’s revenue. We'll dive more deeply in tip 6 below.)

2. Make it easy to identify returned items

One of the most difficult steps of processing returned items is being able to identify the item quickly and accurately. Sometimes, the customer will cut off the item tag thinking they will keep the item, but then later decide to return. When that tag-less returned item arrives at the warehouse for processing without the tag, the operator will need to spend some time identifying the item. If the operator has an RMA, or the operator can very quickly identify the original order being returned, and the operator can use those references to help make an accurate identification. But sometimes a customer will return items without an RMA or other information that allows the operator to identify the original order. This often happens, for instance, when a customer goes to a UPS store to return the package, includes no RMA or original packing slip, and the UPS store uses its address as the return address. 

At Mochila, we've found that having a clear product identifier sewn into the garment by the manufacturer is a big win: it saves time and ensures accuracy in the return process by eliminating guesswork on the 3PL’s part, and allows us to return the item to sellable inventory in minutes.

3. Establish clear refurbishment guidelines

Make sure your 3PL has clear guidelines that its operators can follow to inspect returned items and determine what constitutes a "like new" condition. If an item cannot be returned to a "like new" condition, your 3PL should be able to specifically detail why the refurbishment attempt failed as well as specifically track the returned item in inventory in case further investigation is required in the future. 

At Mochila, we find that establishing return processing guidelines works best when it is a collaborative process. See tip 4 below for an example of how we do this.

4. Only refurbish items where it counts

Not all returned items have equal value, and refurbishment efforts should be prioritized accordingly. For example, we often discuss with our clients that items with a lower resale price typically aren’t worth investing as much labor into restoring to a sellable condition as items with a higher resale price. We also note that a returned item that is out-of-stock and still in high demand is worth more, since you can capture a sale that would otherwise have been lost), so it follows that you would be willing to pay more to restore those returned items to sellable stock. Finally, in general, it is more practical to invest more when there is a high expected success rate of restoring an item to a sellable condition than where it is not the case; if the returned item can rarely be restored, why spend any time and resources trying to refurbish the item?

5. Leverage data to lower return rates

In order to lower return rates, brands should actively monitor real-time reports on returned items to identify reasons items are being returned. For example, return rates might be unusually high for particular items, categories, or suppliers. Tracking return rates over time at this granular level can help you to spot anomalies.

Trend data should also be pared with notes from the return processor to identify root causes.

6. Prioritize your returns for the biggest impact

Similarly to our refurbishment tip above, not all returns have equal value and successfully managing costs in the returns process also requires prioritizing returns generally for the biggest impact. Returned items that are still in demand, in season, and are out of stock can increase your bottom line - if you can get them back into stock quickly. 

Establishing a cost-effective returns process is critical to lowering reverse logistics costs with apparel returns. Mochila can help identify and prioritize returns and move high-priority items to the top of the processing queue to facilitate a faster returns process that impacts your bottom line.

Questions? Reach out to learn more about how Mochila can help lower your return costs.

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