44% of Fashion Brands Label Returned Garments as ‘New’ – Sourcing Journal

Retail’s struggle with high return rates—particularly since the start of Covid-19—has been well documented, with merchants handling $761 billion in sent-back product last year. But another question remains: What do retailers typically do with the product they get back from shoppers?

According to a Retail Systems Research (RSR) report, 44 percent of fashion and specialty retailers and brands put returned product back in the store on a sale rack as new whenever possible. This is double the 22 percent that resell the discounted items in stores classified as “open-box/returned/damaged.”

The fashion retailers are largely in line with their fast-moving consumer goods (FMGC) counterparts, who sell returned products as new 45 percent of the time and sell at a discount 15 percent of the time. But they are far off from their hardgoods and general merchandise equivalents, who are more inclined to sell at a discount (50 percent of hardgoods retailers and 53 percent of general merchandisers) and far less likely to sell as new (8 percent of hardgoods retailers and 26 percent of general merchandisers).

That puts fashion retailers in a dilemma, as like-new items can be virtually indistinguishable from a new garment even after a few wears. However, one nick, snag, or makeup smear and consumers could soon discover that the item isn’t as advertised, which could lead to public backlash. The potential negative implications of the practice, even if not carried out maliciously, illustrates that merchants can go down a slippery slope when incorrectly identifying a used product as new.

“For items in a collection that already exists in store, the main affront here is that the plan for what that store may have needed from an allocation perspective is off,” the report said. “For items not in the collection, however, such items stick out like a sore thumb, and shoppers will likely be able to tell that such an article was previously owned and returned.”

The specialty/fashion players are a step ahead of their contemporaries in returning a product to a central facility for redistribution, with 17 percent doing so. Just 8 percent of hardgoods retailers and 5 percent of general merchandisers send the product to a centralized location.

Across all retailers examined in the report, the ability to accept returns is heavily important to retail’s “winners.” Seventy-five percent of retail winners consider returns acceptance a high-value service, compared to just 40 percent of all others. Fortunately, all of retail seems to understand the value of real-time visibility into available products, with 75 percent of winners seeing its importance to their company and 68 percent of other retailers agreeing.

RSR’s definition of winners is any retailer with comparable store/channel sales growth above 7 percent, while merchants at this sales growth rate as “average.” Those below this sales growth rate are labeled as “laggards.”

There are considerable gaps in both cohorts when it comes to other fulfillment options. Seventy-four percent of retail winners consider pickup scheduling a high-value service, compared to just 40 percent of the others. And 70 percent of winners value the ability for online order management systems to direct customers to the optimal pickup location, compared to just 28 percent of average retailers and laggards.

Overall, there’s still a divergence between the 82 percent of retail winners who see in-store fulfillment solutions as high-value employee tech, and the 64 percent of the other retailers who appreciate the technology.

Beyond the fulfillment process, fashion players in particular may also have a different perspective than other sectors on overall capital allocation and the requirements necessary to improve their business.

The RSR report revealed that 61 percent of fashion and specialty brands and retailers say they never even get to the subject of return on investment (ROI), while the same came be said of 67 percent of FMCG retailers. These totals are well above the 37 percent of general merchandisers and 42 percent of hardgoods sellers that get to that point.

Where fashion merchants really differ from the rest of retail is their feeling on how much they can build out their store experiences. Two-thirds (67 percent) of fashion and specialty retailers say their stores already have too much going on, and don’t have the capacity to take on more projects. This is well ahead of the 48 percent of FMCG sellers that believe this, and 32 percent of general merchandisers with this mindset.

However, aside from the store aspect, fashion is still fairly more open minded to new technologies and innovations versus other retail sectors. Only 17 percent say that the existing technology and infrastructure they have prevents them from moving forward with new solutions, by far the lowest rate of the retailers surveyed. On the opposite end of the spectrum, 75 percent of hardlines retailers believe their current tech gets in the way of further evolution, while 47 percent of general merchandisers share this mentality.

As such, fashion merchants don’t really find that new technologies can distract them from their overarching goals. Thirty-nine percent said they were conflicted as to whether the new technologies would be tools or distractions, while 53 percent of general merchandisers had this internal conflict.

Regardless of the roadblocks that retailers cite, pilot programs are consistently considered the most favored solution across sectors. Half the 82 retailer respondents in the survey said the deployment of pilot programs in specific stores and regions to prove ROI was a top way to overcome constant organizational inhibitors. Another 45 percent stressed the value of procuring vendor funding for in-store projects, while 34 percent prefer managed services to speed technology implementation.