Returns decisioning: The secret hack to higher recovery and improved margins

Mistakes retailers and 3PLs make with returns decisioning

When the pandemic hit supply chains in 2020, many organizations cobbled together “good enough” solutions to survive the changing landscape of higher e-commerce orders… and therefore higher volume of returns. (E-commerce has an average return rate of 17.6%, while store return rates average at 10%). Throw in omni-channel behaviors like buy online, return in-store (BORIS), and you add the complexity of differing product assortment, inventory, and sometimes policies.
 

Most retailers and warehouse operators try to repurpose existing tools to process returns, whether a point-of-sale (POS) system or a warehouse management system (WMS). Yet these systems were built to sell like-new, pristine inventory, not to receive back non-new inventory from a shopper. Therefore, the outcome often involves swivel-chair processes and system switching to process a return effectively. 
 

Even worse, these systems lack the returns decisioning capability that helps retailers recoup revenue, which recent research shows is a top priority for retailers in 2025.

Leveraging returns decisioning engine for better margins

Now that the dust has settled from major supply chain disruptions, more organizations are seeing the value of investing in purpose-built software for returns, namely a returns management system (RMS). A modern RMS must be underpinned by an intelligent dispositioning and routing engine that not only helps decide what to do with a return but does so systematically by understanding the highest-margin, next-best home for that item.
 

A modern RMS must be underpinned by an intelligent decisioning engine that not only helps decide what to do with a return but does so systematically by understanding the highest-margin, next-best home for that item.
 

This software functionality is the very thing that helped one national, multi-brand retailer transform a “total loss” category to a net-new revenue stream for the company and keep millions of pounds of waste out of landfills.
 

Decisioning at any touchpoint is key

In addition to leveraging the revenue protection of dispositioning, timing is also paramount. The earlier in the process you can assess the best route for a return, the higher the revenue recovery (i.e. fewer touches, transportation costs, etc.)
 

In general, a modern RMS should provide the ability to disposition a return at any of the key touchpoints of the returns lifecycle:

• Touchpoint 1: decisioning at returns initiation
  • If the cost to ship an item back to a retailer exceeds the value of the item itself, it is better to offer a “just keep it” option (with the caveat that you should monitor potential abusers of this policy).
  • If you have a bathing suit returned in New York in September, consider directing that item to a store in Florida or California to increase the likelihood that it can be resold at full price.
• Touchpoint 2: decision at return method
  • If you offer in-store returns, having the ability to guide your associates on the next best path, eliminates the friction your shoppers experience when the associate isn’t sure what to do with the item, or you are hiring seasonal temp workers that may not be as familiar with your processes.
  • For omnichannel returns, providing associates with a systematic way to understand cross-channel inventory and avoid instant or excessive markdowns.
  • For mail-back returns, you can intelligently route the item to the closest or best store or warehouse.
• Touchpoint 3: decision at returns receipt (store or warehouse)
  • For slightly damaged returns received at the warehouse, you can route them to a value-added services team and relist the item at full price in as few as 1 business day. (i.e. remove a scuff from a shoe, relist at full price)
  • For all returns, avoid the binary thinking of returning to stock or disposing/recycling. Unlock the ability to disposition to a variety of resale channels (based on category, condition, likelihood of resale, inventory levels, and more)
     

Unlock better returns decisioning with Smart Disposition

A modern returns management system with an intelligent decisioning engine can help retailers systematically determine the most profitable destination for each returned item, increasing revenue recovery and minimizing losses. This can include options such as reselling through recommerce channels, offering “keep it” options for low-value items, or routing items to different locations based on seasonality and demand.

Smart Disposition is the decisioning engine that powers Blue Yonder’s returns products. It decides the optimal outcome for every return, so retailers can:

• Recover maximum resale value from returns
• Position returns strategically as inventory
• Optimize costs including transportation and operations
• Reduce waste and environmental impact