The Real Cost of Black Friday - Prepare for the "Crimbo Limbo"
by Laura Gee
Prepare yourself retailers, Black Friday is coming. As shoppers get ready to hit the sales hard with their October paycheque, retailers start preparing for the floods of purchases coming their way.
It was just a few years ago that the Black Friday craze crossed the Atlantic from the USA and became an annual UK tradition that many shoppers now rely on to pick up all the best bargains. Every year, reports hit the news of shoppers fighting it out in stores for the last of the discounted TV’s and designer handbags, whilst crammed into stores like sardines. But with the rise of online retail and the newer tradition of ‘Cyber Monday’, shoppers can now avoid the hussle and bussle of the town centre and blow their entire paycheque from the comfort of their own home. With shoppers blindly buying, fueled by the promise of a bargain, IMRG predicts that shoppers are set to spend £1.54bn online this Black Friday. However, with online orders sharply increasing, naturally so do returns. The real cost of Black Friday isn’t just the financial impact of returns, its the logistical nightmare brewing under the surface as tens of millions of parcels end up in “Crimbo Limbo”, a no-man’s land where un-processed returned stock lies. We predict that the impact of these returns over the Black Friday weekend will be £362 million in the UK.
When January rolls around, many retailers are likely to be sitting on a wall of cash patting themselves on the back for a job well done over peak, oblivious to the true impact of their looming returns problem. In reality, they’re faced with masses of refunds to issue to shoppers, plus the cost of processing each individual return, taking weeks to get stock back into circulation. On average, the cost to process a return is 75p per parcel, plus the extra carrier fees and any additional admin charges. So if there are millions of parcels coming back, the bill soon stacks up.
So, what is Black Friday really doing? In short, it’s creating a problem for your supply chain that many won’t be able to correct until after peak. Some retailers have even told us that they’re deliberately planning on having their 3PL’s and fulfillment centres hold any inbound parcels to stop them blocking up the warehouse during this busy season, fully accepting they won’t be able to cope with the volume of returns, but leaving money on the table in the process. In peak season, getting returned stock back into circulation should be one of retailers top priorities. But processing returns quickly can be an impossible task through the busiest time of the year.
“The pressure and impact of Black Friday means the traditional returns peak typically experienced in January has been pulled forward. Returns from Black Friday hit the warehouse just as the uplift in sales for Christmas hits the warehouse, so the retailer needs to balance the operational demands for outbound picking with the need to process returns and refunds and get stock back onto the shelves - both important tasks. Visibility is the key to making this work in terms of resource planning.” - Steph Tite, Returns Manager, XPO Logistics
Returns are easier to ignore when they’re just a pile of mystery parcels in the corner, but once you know the total cost of the returns they become harder to forget. Any retailer with their eyes on the data would likely have a different approach to their returned stock. A pile of mystery parcels might not be that concerning, but £362 million worth of stock sat there not moving? That’s a much larger problem in the Industry.
Effective returns management all comes down to having full visibility of your returns data. To combat the Black Friday returns wave, retailers need to understand when stock is coming back to plan accordingly. Retailers using the ReBOUND platform are in a unique position as they have advanced warning of what items to expect back from the moment it is registered online.
Want to know more about how to effectively plan for peak? Check out our top 5 tips on how to prep your policy!