What Happens to Returned Goods in Online Retail?

Returned goods  are an inescapable part of the online retail business, but it does manage to draw flak from sellers and buyers alike. For the buyers, it is important to have the agency to be able to return a product and get a refund if and when it is damaged or unsuitable. For the seller, this means reversal of a successful transaction, with the additional cost of managing the return, and worst of all, being susceptible to product returns fraud. All this makes product returns a slightly controversial topic, but by now, they have also become an industry standard, at least in certain product categories. This means that the customer expects to be able to return a product that they buy, and the onus falls on the seller to see to it that it is done.

With this in mind, let us frame a new question – what exactly does happen to returned goods? Are they recycled, or are do they just rejoin the shelf? Are they repaired or refurbished or just trashed? Considering that on an average, 12% of the products bought are returned – 12-18% in casual apparel, 15-20% in electronic goods and around 35% in high fashion apparel – we realise that the product returns economy is not a small thing. In fact, it forms a major subsystem of products moving against the flow. This also means that in terms of capital, product returns amount to a massive chunk. So what really does happen to the returned product? Let’s take a step-by-step look.

When Products are Returned

1. Reason for Returned Goods

There are two reasons why a particular product might return to the warehouse – 1. Failure in delivery – the customer could not be contacted, was not at home, the address was wrong, etc.  – In which case, the transaction would be cancelled and the product would be returned to the shelf. 2. Customer rejects the product – when the customer returns a product, it first has to go through a quality check. Customers can return products for various reasons, and just because a product is returned doesn’t always mean that it is faulty. So if it passes the quality tests, it is brought back onto the shelf. But what happens if the product does not adequately pass the quality checks?

2. Refurbished Products

It is common to see product pages on eBay and ShopClues that proclaim ‘Refurbished product’. Returned products with minor damages are repaired and resold as refurbished products with a discount to clear the inventory. The retailer basically sends the damaged product back to the manufacturer The product is essentially new, under warranty, and have been repaired by the manufacturer to ensure proper functioning. This method is generally utilized in the electronics category – it is easy for the manufacturer to repair minor damages and resell the product under the tag ‘refurbished’. In various cases, the manufacturer may also use words like ‘reconditioned’, ‘remanufactured’ and ‘like new’, but the concept remains the same.

3. The Really Damaged Products

But what about products that are damaged beyond repair? Once the seller recognizes a really damaged product and ships it back to the manufacturer, the manufacturer may try and salvage spare parts from the product and shred the rest of it. Now it depends from scenario to scenario as to who will pay for the damage, between the retailer, the manufacturer and the logistics operator. If the packaging or the seal of the product is broken, it cannot be resold. It is not uncommon for sellers to sell products or their parts in the local market a slashed prices. This is much like the refurbished sale, except that it is happening from the retailer’s end and not the manufacturer. Finally, the really damaged products have to be dumped.

This is what happens in the life of a returned product. To know more, get in touch with Browntape. We are India’s leading ecommerce experts, and we are always happy to help!