DIY returns are tough

Blog

DIY returns are tough. But, powered by AI, your supply chain is tougher.

  • DIY returns are tough
3 minute read

The problem of product returns is growing across every retail segment. Last year, the total value of returned merchandise was $890 billion, representing almost 20% growth compared to 2023. Clearly retailers need to master this challenge, by minimizing the time and costs involved in processing returned goods and getting them back into sellable inventory.

Honestly? Most retailers aren’t doing very well. The average cost of processing a return is 30% of a product’s original price. And less than half of returned goods are resold at full price. About 12% of returned goods are never resold at all.

Big products, big costs, big problems

These negative impacts are only amplified for do-it-yourself (DIY) retailers, whose products tend to be large, hard to handle, value-dense, operationally complex and otherwise challenging from a reverse logistics perspective.

From fragile porcelain bathroom fixtures and marble tiles to bulky major appliances and lawn equipment, DIY products are sold and shipped in carefully packed boxes, cushioned with protective materials. But they often arrive back in a very different condition: broken, used or dirty. They may be missing the original packaging or not packed well, leading to damage in transit.

Even when large, bulky DIY products are returned in like-new condition, in the original package, they still represent a logistics challenge. Often, they require large amounts of warehouse space, high freight costs, two-person lifting or other special handling, as well as forklifts and other specialized transport equipment. Depending on their condition, current inventory levels and market demand, they may follow a winding path from stores or warehouses to open-box consolidation centers, liquidators or landfills.

How big is the reverse logistics cost impact for DIY retailers? It’s been estimated that, for bulky items like a toilet or refrigerator, retailers only recover 10% of the product’s original value on average.

The reality is that returns in DIY retail are rarely simple. The business is defined by bulky products, high freight and handling costs, fragile or finish-sensitive materials, and complex SKUs with components, accessories and warranty implications. Product delivery and installation are often a process of trial-and-error, and product mismatches are all too common.

If you think the answer is implementing ever-stricter return policies, think again. Fashion retailers are learning the hard way that enforcing over-restrictive return timelines, or always requiring a receipt, even if an item is defective, quickly generates consumer dissatisfaction—and potentially negative reviews and viral videos on social media that damage their brand image.

A Blue Yonder survey found that, after retailers tightened their return rules, 59% actually saw an increase in product returns. And when Blue Yonder surveyed consumers, we found that 59% of shoppers are deterred by a restrictive returns policy. 
 

The solution? An intelligent supply chain, built to master returns

Consider the alternative: Make returns easier for shoppers, because 70% will purchase more from your brand following a positive returns experience. By streamlining the returns process for your shoppers, you can turn a cost into an asset. Easy, low-friction returns are a proven way to earn shoppers’ trust and increase their lifetime value.

You also need to optimize your internal processes for handling the large, and growing, volume of returns that has become a retail reality. Skyrocketing returns are already transforming DIY retail. Now it’s your turn to transform your reverse logistics operations in response.

The great news is that Blue Yonder has all the returns management capabilities you need to accomplish this quickly, seamlessly and cost-effectively.

Trust us, your overworked retail employees and customer service staff don’t want to deal with frustrated shoppers, product condition issues, missing receipts, open boxes, complicated pricing structures and trade discounts. And, given the complexity of reverse logistics costs, special handling needs and twisting product pathways, they lack the cognitive abilities to calculate the best, most profitable resolution for every product return.

That’s where Blue Yonder comes in. From the moment your shopper initiates a return through an online portal, our advanced artificial intelligence (AI) is hard at work, optimizing the result of that return. Blue Yonder returns management software is purpose-built to integrate the reverse logistics process into your larger supply chain, applying the same logic and discipline used to plan forward logistics. It encompasses forecasting, inventory routing and intelligent disposition, planning with the same degree of effort and precision used for outbound product shipments. And it’s designed to accommodate the complexities of retail categories like DIY and home improvement.
 

Optimize your returns with Blue Yonder consumer data

Are changing return policies impacting your customers? Discover key consumer insights from Blue Yonder's 2024 Consumer Retail Returns Survey to create a return strategy that benefits both your business and your customers.

Download The Results

How does it work? At the moment of returns initiation, Blue Yonder gathers and analyzes data on the channel and store where the product was sold, its price, its condition and the consumer’s history with your brand. After all, there’s a big difference between a fraudulent, serial returner and a loyal, high-value consumer who made a rare purchasing misstep.

But that’s just the start. Blue Yonder AI is also doing some major calculations related to the probability of the product being resold through various stores and channels. After all, every return represents a multi-variable optimization problem, aimed at maximizing the likelihood and value of a resell. Product condition, customer history, demand and sales history, inventory levels, product location, shipping and handling costs, and fraud risk—these and other data points must be considered quickly.

While that challenge exceeds human cognition, especially at speed and scale, Blue Yonder’s AI-enabled decision engines reach an optimal solution in seconds. AI determines the best disposition, the best return method and the right incentives. Blue Yonder optimization engines also can define a specialized course of action for each consumer, ranging from VIP treatment to preventing the return based on suspected fraud.

With Blue Yonder, your organization is actively, intelligently and quickly making the best possible choice for every return. Your options include:

  • Having the consumer print a label and drop-ship the product, whether to your warehouse, a liquidator or the original vendor—making accommodations, as needed, for heavy or oversized products
  • Providing the consumer with a QR code and directing them to your store, where they might make additional purchases
  • Issuing a refund without a product return, because the logistics costs exceed the product’s resale value
  • Combining the return with an incentive to exchange it, or buy another product at a discount
  • Barring the return based on your stated policies or the potential of fraud

 

Whatever the resolution that’s determined for each returned product, you’re in complete control, because Blue Yonder AI is trained to follow your rules and maximize your outcomes. Its proprietary algorithms consider all your objectives, including profitability, sustainability and customer service. You can stop dealing directly with damaged products, fraudulent returns and angry consumers. And you can have 100% confidence that the right returns path is always selected, based on data and predefined decision parameters, not flawed human judgment.

Transform your returns from margin drain to loyalty driver

If your organization views returns as a liability, or worse yet, doesn’t focus much attention on them at all, you need to change your mindset. If you’re a DIY retailer with $5 billion in sales, and half of them made online, you have a $750 million annual returns problem. Don’t you think it’s worth addressing that problem head-on?

Instead of seeing returns as a broad strategic challenge, you need to view each return as a tactical opportunity to build long-term loyalty, encourage an additional sale with the consumer, and resell the returned product to another shopper. Yes, you’ll be investing in reverse logistics. But Blue Yonder helps minimize your logistics costs, while also unlocking new revenue and profit streams to offset them.

It’s time to flex your supply chain muscle and gain greater control over the returns process, by using the same AI-enabled solutions and best practices you apply to the rest of your supply chain. Why not contact Blue Yonder—and start increasing your power and control today?