Navigating Holiday Returns: A Comprehensive Guide for 3PLs

Let’s face it. Your Mom’s brother’s second wife, Aunt Betty, doesn't know you as well as she thinks she does. She got you a gift that was, well, not great. We all acknowledge that there are times when we need to return an item that might not have met all the expectations the giver had hoped. 

According to Statista, holiday retail sales increased 5.3% between 2021 and 2022 from $889.3 billion to $936.1 billion. Simultaneously, retailers saw an uptick in holiday returns for that same time period. It’s reasonable to think that higher sales volume would translate into higher returns, but is that the only reason for the high level of returns during the 2022 holiday season? 

In this article, we'll explore the significance of having a seamless returns plan in place for the holiday season, shedding light on why it's essential for your 3PL operations.

Why Do Returns Spike Around the Holidays? 

The holiday season, a time of bustling shopping sprees, both in-store and online, brings an inevitable consequence – an uptick in returns. This surge is particularly pronounced when the purchase is intended as a gift. Recognizing the inevitability of returns and closely monitoring return trends are pivotal aspects of keeping your shipping operations finely tuned. Handling returns with finesse should rank high on your priority list, ensuring a seamless process for both your internal teams and your valued customers.

As a 3PL, you face an array of reasons for returns. Your mission is to streamline the return process, making it as straightforward and well-organized as possible. Here are three common scenarios to navigate when dealing with an influx of returns during the holiday season:

           1. “Sorry, Mom. It didn’t fit because I’m not 12 anymore.”

Clothing and fashion accessories constitute a significant portion, approximately 20%, of all holiday returns in the United States. Often, the item aligns with the purchaser's preferences but not with the recipient's style. It might be that the gift-giver made an excellent choice, but the size, cut, or length didn't quite match the end user's expectations.

           2. “What do you mean, my package couldn't be delivered?”

A staggering 80% of holiday shipping returns are related to items damaged in transit. The holiday season ushers in increased sales, leading to a surge in shipping volume, which can, unfortunately, result in heightened shipment damage. The remaining 20% of shipping returns can be attributed to various factors, such as incorrect addresses that necessitate the carrier to return the package or requests for a "signature required," leading to returns due to the absence of a recipient.

          3. “OK, I sent the item back. So, where is my money?”

Retailers and eCommerce companies are increasingly simplifying the return process for unwanted items. While the return trend is on the rise, sales revenue doesn't necessarily suffer. This is mainly due to businesses offering "in-store" credit instead of returning the customer's payment. Additionally, with the proliferation of local drop-off points, customers don't need to repackage and ship items back. Instead, they can conveniently return items to a retail partner for a full refund. These returned items are subsequently sent in bulk to the 3PL for sorting, tagging, and processing, commonly referred to as ‘reverse logistics’. 

For 3PLs (as well as retailers and eCommerce entities), handling returns is undeniably complex, demanding meticulous oversight. Establishing a transparent and equitable process for 3PLs to receive, track, and process returns, all while aligning with clients' stringent standards, is paramount for ensuring a seamless holiday shopping experience.

How Can 3PLs Optimize Returns Handling?

Now that we understand why returns happen, why returns can be difficult, and why handling returns well is so important, let’s look at a few ways that 3PLs can streamline the return process. 

1. Designated Returns Area - Have a designated space to receive the items tagged as customer returns. The goal is to keep these items separate from the other non-return products. This may mean floor space for processing and shelving for storage. Dedicate an area for repackaging items, and have packaging materials easily accessible.
2. Identify Damaged Items - Build into your return process a way of identifying damaged items and separating these items from the resellable products.
3. Track Items - Know what is happening to the items once processed. Good communication with management allows fast turnaround and billing of processed returns.
4. Document Returns with a WMS - A team is only as good as its power to document the processes and complete the work in the shortest time possible. Having a robust WMS will reduce complex processes down to keystrokes and mouse clicks. This also allows for almost instant feedback for others to track inventory movement and prepare other staff to complete their part of the process.
5. Automate the Returns Process where Possible - Software-aided warehouse management will allow users to identify return orders, flag problems, view tracking data, create new customized shipping labels, and provide the reporting necessary to track volume and patterns. This data helps to eliminate errors and completes the process with as little stoppage as possible.

Leveraging Your WMS for Holiday Success

As manufacturers ramp up their production speed to meet the demands of the holiday season, 3PLs need to take the time to prepare for the increased workload and strain that this season adds to their teams. Being prepared with the right tools, tactics, and people is crucial to think about, ahead of the busy season. As an industry-leading Warehouse Management System, Infoplus provides an application that can play a critical role in the processing of both everyday warehouse management and specialized processes like product returns. What can a WMS offer to streamline a successful Holiday return season?

1. Inventory Separation - Damaged or discontinued items can be sequestered into a non-pickable location keeping them from entering the fulfillment process.
2. Shipment Tracking - Create and track shipping labels from within the application. This eliminates the necessity of working with multiple software applications like Parcel Carrier websites.
3. Real-time Reporting - With a web-based application, reporting, documentation tracking, real-time inventory, and billing processes are only as far away as your nearest internet browser.
4. Optimization Options - The Professional Services department within Infoplus can help you customize your application to give you the maximum output for the least possible input.
5. Automation By Design - Infoplus natively automates repetitive processes that can add time to fulfillment and return processes.
6. API Integration - Infoplus provides an open API for 3rd party integrators to connect and work with the application. This API structure makes the power of Infoplus available to other applications like Shopping Cart websites and web-based Work-In-Process boards. 

Top Strategies for Influential Returns Management

Early preparation for the processing of product returns can help make a hectic holiday season a profitable addition to your bottom line. Communicating well with your clients and understanding their seasonal goals and policies will build the trust necessary to maintain an excellent long-term partnership. Here are some key strategies for making the holiday return season a win-win for you and your clients.

1. Understand the Client’s Return Policies - Have a clearly defined plan that meets the client’s quality control standards. This will eliminate mistakes and difficult conversations down the road.
2. Easy Document Management - Make sure your client has access to and knows how to view important inventory reporting documentation. This data will be key for determining the client’s next steps for their inventory.
3. Provide Detailed Reporting - Understand the data each client needs.  Explain the reporting power of your WMS in providing a clear and accurate picture of the status of the client’s inventory.
4. Analyze the Data - As the data is collated, patterns will begin to develop. These patterns can help to identify defective products, items that damage easily due to poor product packaging, or low-demand products that will require additional planning on the client's part.
5. Recover as Much Inventory as Possible - Accurate, rapid, and cost-effective completion of a return evaluation will get items back on shelves and in the hands of your client’s customers.

Post-Holiday Analysis and Improvements

In a world where data is king, it is important to look back on events with an eye toward improving the process for the next time. Once the holiday season ends, take the time to review what went well and what could have gone better. Here are some questions to ask when the dust has settled: 

Analysis:

• Did you leave your client in a better position than prior to the start of the holiday season?
• Did failures and miscommunications make your team work long, hard, and frustrating hours?
• Was your WMS up to the challenge of the high-volume inbound and outbound during the busiest part of the year?
• Were you able to sail through the season with the wind at your back or was it a fight for every mile, while waves of problems threatened to sink your boat? 

Improvements:

• With real-time analytics and machine-learning technology, Infoplus can calm the waters and help to get you safely back to port.
• With real-time notifications, email, and inventory alerts, Infoplus keeps your client informed of trends and needs that can improve their profit margins.
• With best-in-class customer service, customizable features, and automated processes, Infoplus focuses on helping you earn your client's business every day. 

To Wrap It (back) Up

Holiday returns, driven by evolving consumer demands and the surge in e-commerce, present multifaceted challenges. The landscape is shaped not only by size and style mismatches but also by damaged goods, incomplete deliveries, and a shift toward store credit over cash refunds.

For both retailers and 3PLs, these challenges loom large. The holiday rush strains supply chains, making the quality of the return process a pivotal factor in customer satisfaction.

Effective communication is the key to mastering holiday returns. By aligning with client policies, providing transparent reporting, and harnessing data-driven insights, 3PLs can help their partners recover valuable inventory and meet end-user expectations.

As the holiday season approaches, it's crucial to assess what works and what doesn't in your returns process. Embracing these strategies, Infoplus offers the guidance needed to achieve a seamless returns process, benefiting your clients, boosting customer satisfaction, and contributing to a thriving bottom line. Invest in Infoplus for a successful holiday season.