Enterprise Mobility & the Connected Worker Blog

Independent Recommerce Models Help Sellers Mitigate Returns Losses

by Emily Gove 3/9/2023

With the growing ease of online ordering, try-at-home models, and lenient refund policies, the modern consumer is no stranger to product returns. The National Retail Federation (NRF) estimates that over 16% of online and in-store purchases were returned in 2022, down from 20% in 2021. Returns are a major drain on retail and ecommerce profits, and the reverse logistics of returns can be messy. For companies that lack a plan for returns management, reverse logistics add extra costs to product losses through added shipping, worker inspection time, refurbishment, repackaging, and reshipping. For vendors that lack a dedicated channel (and physical space) for returns management, like-new products may be left with customers, liquidated, or sent to a landfill.

Recommerce, also called reverse commerce, is a channel through which previously owned products may be sold. In the last five years, third party recommerce platforms have surged, offering a more profitable alternative to conventional returns management. The growth in recommerce is a welcome solution to a persistent financial problem for retailers and has been further catalyzed by growing consumer interest in sustainability.

Although it improves profitability, recommerce can be especially challenging for vendors of bulky products like furniture. Not only are products like furniture and appliances expensive and cumbersome to ship, they are also more likely to become damaged during the shipping process. FloorFound, a furniture recommerce company founded in 2020, has worked to make furniture returns more lucrative to companies, managing the logistics and inspection of returns and supporting recommerce inventory sales on vendor websites. Entering its third year of operation, FloorFound has seen positive responses from consumers, who have embraced the opportunity to access premium brands at lower prices.

Affordability is a primary driver for consumers to purchase returned items, and can increase the likelihood that those shoppers will return to consider higher-priced goods. This is especially true for premium or luxury brands, which shoppers might not typically purchase. In a recent survey, FloorFound reported that nearly 90% of shoppers that previously purchased a resale item made over $175,000 a year – affluent shoppers lead the charge in the hunt for luxury items and pieces that might be difficult to find new. Across income levels, affordability will continue to drive recommerce sales during the months of recession ahead. Shoppers that would have waited to make investments in appliances or furniture may find the discounts offered through recommerce enough to make a purchase sooner.

Sustainability has also made recommerce models more attractive to both consumers and retailers. Companies are publicly committing to reducing waste in the supply chain, but with consumers wary of greenwashing, companies must be able to show that their initiatives are working. Integrating returns into an online sales platform can attract new customers and grow the brand loyalty of returning customers who align with the mission of sustainability. Ryan Matthews, co-founder of FloorFound, noted in a panel at Manifest 2023 that the sustainable ripple effects of recommerce can lead to more durable products and fewer returns in the future. For example, companies that would have written off returns as losses are now seeing those items as an income source: that added income can be used to buy more durable components for future product lines, which will be less likely to break, and thus less likely to be returned.

Outsourcing returns management to a company that specializes in recommerce can improve productivity and profitability for retail and ecommerce companies. In furniture and appliances, any processes involving the pickup, inspection, refurbishment, storage, and repackaging of returns will be handled by a single recommerce provider, rather than the retailer or a group of third parties (truckers, liquidation warehouses, logistics coordinators). For the recommerce company, consolidating the returns across multiple brands creates an economy of scale that improves profitability and streamlines returns work for its drivers, inspectors, and warehouse workers. For the brands outsourcing returns management, disruptive tasks are removed from mobile workers’ daily workflow, while profit from returns is added back into the bottom line as a new source of revenue.

Recommerce & Enterprise Mobility
The recommerce industry is growing across categories and will have unique enterprise mobility needs as it develops. Flexible inventory management systems will be essential for handling inventory items across a range of brands, as well as various tiers of quality for resale. Interoperable systems, which can integrate on the back end of retail and ecommerce platforms, have worked well for recommerce vendors, as they will enable brand-loyal customers to have a single point of entry for new and used products of a favorite retailer.

Advancements in data capture hardware will also enhance recommerce workflows. RFID is becoming more widely used in the fashion industry for determining the authenticity of returned goods, and recommerce workers will need the tools to scan items and activate tags as needed. RFID tags also have the ability to monitor a product’s use, from simple metrics like date of purchase, to impact monitoring, which can assess times that a furniture shipment bumped against something (or even the number of people who sat on a sofa). While more advanced RFID applications have not been widely deployed, they will change the nature of returns management and better equip recommerce companies as they inspect and resell products.

Interested in learning more about recommerce? Contact info@vdcresearch.com with questions or ideas for custom consulting projects.