How Does Recommerce Fit Into Returns Management?
The recommerce market in the United States is valued at $188 billion. It is expected to keep growing, and better reverse logistics is a large part of the reason.
Selling secondhand goods is nothing new. People have always sold, donated or passed on items they no longer use. The hard part has been finding a trustworthy place to sell them.
Online marketplaces work for some sellers and not for others.
Reverse logistics changes that. Brands can now buy used products back from customers, give credit or a discount in return, and resell the items at a margin.
The foundation of a recommerce program is reverse supply chain management: getting products back from customers in a condition that can be resold.
This article explains the role reverse logistics plays in recommerce.
Why is the recommerce market important?
Changing consumer habits have reshaped the recommerce market. Even for used products, buyers expect the service they get when buying new, and sellers who miss that expectation lose them.
Here is why recommerce matters to consumers:
Environmental Sustainability
Shoppers pay more attention to sustainability, and many avoid brands they see as careless about the environment.
Buying secondhand means less waste. Keeping reusable products such as electronics and furniture in use for longer delays disposal and reduces their environmental impact.
Economic Benefit
Recommerce lets consumers trade in products they already own for store credit or a discount. It also lets them buy quality products for less. A year-old phone, for example, usually sells well below its launch price.
Access To Unique Discoveries
Secondhand markets are where shoppers find items that are no longer sold new, from furniture to older gadgets.
Promotes Accessibility To Quality Goods
Recommerce gives shoppers on a smaller budget access to quality products they could not afford new. This is especially true for electronics such as phones and tablets.
The Role of Reverse Logistics in Recommerce
Reverse logistics is how brands get preowned goods back from consumers. It saves the consumer the work of finding a legitimate buyer, and a trade-in can earn a discount on the next purchase.
Product Return Channels
With reverse logistics in place, a brand can give consumers a clear, convenient way to send back products they no longer want, whether right after purchase or after some time in use.
The process has to collect these goods without losing value to damage or loss. Returns can be routed through third-party logistics providers and warehouse facilities as part of the returns management process.
Product Sorting and Processing
Returned goods have to be processed properly before they can be resold.
Returns management covers this step. Returned products are inspected and graded. Items fit for sale go straight to the right resale channel. Items that need repair are repaired. Items that cannot be recovered are recycled or disposed of under the appropriate procedure.
Reverse logistics also produces the return data: why items come back, how, in what condition and when. That data shows how customers behave and where the program can improve.
The retailer also has to plan packaging for preowned products.
Product Repurpose and Resale
After processing, each product goes to repair, resale, parts harvesting or disposal. The aim is to restore enough function and value for the item to sell at a profit. After sorting, the item moves to resale and is listed for sale.
Resale can happen in a physical store such as a thrift shop, on an online marketplace or on a dedicated recommerce site.
Why is Reverse Logistics in Recommerce Important?
Reverse logistics gives businesses and consumers a dependable way to move goods in both directions.
Here is why that matters.
Increased Sales
Recommerce reaches buyers a brand would not otherwise reach, which increases sales.
Reverse logistics supplies the inventory to serve those buyers. And because customers know they can return an item that does not work for them, they buy with more confidence.
Sustainability
Recommerce allows businesses and consumers to extend the lifecycle of products.
Many products are harmful when they are thrown away. With a recommerce operation, a business can reduce waste and environmental impact.
Inventory Management
Reverse logistics management keeps inventory under control. Tracking returned stock through the returns process prevents both excess inventory and shortages.
The Benefits of a Recommerce Program
More retailers and shoppers take part in recommerce every year because it pays. The benefits of a recommerce program include:
- A better understanding of recovery costs and how to connect returned inventory to the right channels
- Increased value of returned items in secondary markets
- Better control of a company brand, reducing counterfeit products with total visibility into recommerce and restock opportunities
- Using data to make smarter decisions and keep unsold items out of landfills
- Driving sustainability goals by embracing recycling, repair or resale opportunities
By considering resale opportunities, brands can both increase revenue and reduce their carbon footprint.
Move toward a circular economy model
The circular economy is a model for reducing environmental impact by redefining a product’s lifecycle. For brands, this means prioritizing the reuse, repair and recommerce of an item rather than landfilling it. (According to the 2023 Resale Report from ThredUp, buying and wearing used clothing instead of new cuts carbon emissions by an average of 25%.)
– U.S. Cotton Trust Protocol
Reduced costs and new revenue
A recommerce program is a way to stay engaged with customers and resell items that would otherwise have no value or be landfilled. Whether you outsource your recommerce program (many brands do) or run it in-house, the program is only a smart revenue opportunity if you know the true cost of your returns.
Purpose-built returns management software shows the true cost of product returns and the financial effect of each recommerce decision.
Improve brand reputation & customer satisfaction
Although an item’s resale price dips lower than the original price, the brand value often increases: Retailers with a strong recommerce program report stronger loyalty and brand reputation. Reputation is what drove the luxury fashion brand Oscar de la Renta to launch its own resale site. Today, it has greater control over its products and can give customers greater peace of mind about the quality and authenticity of its products.
Competitive advantage
Offering your merchandise again at a lower price opens a new market and a new channel. Discounted, quality merchandise reaches buyers who would otherwise pass on the price.
Partnerships with environmental organizations
A solid recommerce program with measurable outcomes can lead to useful partnerships. Consider aligning with an environmental organization to raise your brand’s profile while working toward shared goals. For example, REI’s Re/Supply recommerce program is part of a larger corporate effort that donated more than $7 million to 450 nonprofits working to protect people and the planet.
Compliance with environmental regulations
Product returns, especially in fashion, have a large environmental impact.
- An estimated 10% of all returns end up in a landfill (McKinsey)
- Return shipping transportation in the U.S. creates the equivalent emissions of +3 million cars annually (Earth911)
As the EU and other governmental bodies take action on setting standards for returns and repairs, brands should get ahead of regulation now. A recommerce program can lower both the cost of returns management and your environmental impact.
Types of Recommerce Programs
A recommerce program should have a real impact on your sustainability goals, be profitable and let you keep your brand promise. These are the most common types:
- Trade-in or buy back: pay or credit customers for used products, which are resold on the brand’s own website or a marketplace.
- Refurbished or worn: sell products with small cosmetic flaws, from production issues or customer returns, to maximize recovery.
- Take back or recycling: take back used products from customers and send them to a third party for recycling or downcycling.
- Resale: accept used products from customers without paying for them, and resell them as used on your own website or a marketplace.
ReverseLogix Enhances Reverse Logistics in Recommerce
The ReverseLogix Returns Management System (RMS) is the technology foundation for a recommerce program. It gives retailers one place to process returned and traded-in items, which lowers returns management costs, opens new revenue and supports sustainability goals. It works for B2C, B2B and hybrid operations, with a returns process set up for each.
The platform supports trade-in programs, store credit, refurbishment, recycling and resale.
Get a demo today.
Frequently asked questions
Q1: Why are return channels important in recommerce?
Return channels give consumers an easy way to send a product back, online or at a drop-off location. Buyers who know a return is simple are more willing to purchase secondhand.
Q2: What are some examples of reverse logistics in recommerce?
Electronics buy-back and trade-in programs, clothing take-back schemes run by fashion brands, and peer-to-peer marketplaces are all examples.
Q3: How is technology impacting reverse logistics in recommerce?
Software now automates much of the grading and routing of returned items, which makes resale faster and more consistent. Tracking each unit through the process also gives buyers and sellers a record of an item’s condition and history.
Q4: What are some challenges of reverse logistics in recommerce?
The main challenges are sorting and processing items efficiently, controlling refurbishment costs, and tracking data at every step. Returns management software such as ReverseLogix addresses all three.
Where returned stock goes next
Recovering value from returned inventory through grading, resale and recommerce.
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