That was my girlfriend’s response to an easy question – what percentage of your purchases do you return to the store?
My girlfriend has this awful habit of returning damn near everything she buys. It’s genetic; her mom does it too. Sometimes I think it’s a game to see who can return the most in any given week.
You’d think there were an Olympic medal to be won at the rate they take perfectly good stuff back to the store.
Store Returns: Inefficiency at Work
Apparently store returns are a huge waste of time and money for stores. According to an article on CNN Money, retailers expect customers to return as much as $46.28 billion in inventory directly related to holiday sales. Another article by Chain Store Age, a publication for retailers, says that retail chains will lose as much as $3.5 billion to store return fraud in the post-holiday return season.
In 2008, customers returned 8.7% of all goods sold. That was up from 7.3% in 2007, according to the NYTimes.
I still can’t fathom why anyone would need to return 8.7% of all that they purchase. This year, I didn’t return a single item to the store. People like my girlfriend certainly bring up the average quite a bit.
Chart courtesy of CalculatedRiskBlog.
From Store Returns to Dollar Stores
A quick Google search for “store returns” yielded this site: CloseOutCentral.com. On it you can find merchandise by the truckload sourced from liquidation sales as well as piles of returned merchandise.
I welcome anyone to click on over to the “Dollar Store” tab. And I always wondered how dollar stores managed to get so much stuff so cheaply. Dollar Tree Stores, Inc. reports their cost of goods sold comes to less than $.65 on the dollar. With sales, general, and administration costs at 24.23% of revenues, the company manages a fat gross margin of $.115 on every $1 item. OM NOM NOM.
If you’re thinking higher-end, you have to pony up! But there are some good finds, like this lot of 320 decks of playing cards for $112 at ViaTrading. Or how about 100 pairs of assorted branded shoes for $1899 per lot, or $18.99 per pair? That puts Payless Shoes to shame, and they don’t even sell name brands.
Anyone interested in 400 pairs of scissors for $100? That’s only $.25 per! You’ll never run out.
Industries Solving Simple Problems
It’s amazing to me how a whole industry can arise from a very simple problem. First, overzealous shoppers return their stuff to stores. Then stores sell the returns onto wholesalers. Wholesalers sell the inventory in complete lots, or full pallets to individuals and businesses.
Those businesses sell returns to new customers at a fat discount to the original price, either through dollar store-like retail shops or swap meets and flea markets.
I always thought most of the products returned went back to the store shelves. Maybe they do. But at some point a dent or scratched box corner is probably too much brand drain for a business. At that point, the merchandise takes on a whole new life for a new customer ready for discount.