Your Next Best Seller is Already in Your Returns Pile
Your Next Best-Seller is Already in Your Returns Pile
As retail professionals, we are all taught to view a returned item as a cost. It's a logistical problem, a handling expense, and a direct hit to the margin. This mindset, while common, is partially flawed. And it’s potentially costing your business significant future profit.
That returns pile is not just inventory temporarily unavailable to customers; it is arguably a valuable source of unmanaged consumer intelligence. Right now, it is often overlooked by the very teams - Buying, Planning, Merchandising, Quality Assurance - who need it most. If your teams are not trained to treat returns data as forward-looking intelligence, you are, in effect, funding future product failures.
Finding the Profit in the Pile
The first thing to remember about returns is that customers found them desirable when they ordered them. You lost the sale when the customer received it. If you book returns back into free stock and wait to sell them to the next customer that comes along, you may repeat failure. A strategic approach we train at Martec shifts the discussion from 'damage control' to 'data leverage.' When your teams have the right skills, this data can transform critical functions and directly protect your P&L:
- Improving Product and Quality Why is that specific item really coming back? Is it the fit, the fabric, the colour not matching the online image, or something else? When the parties involved are trained to address this, the company can reduce its lost sales.
- Correcting Forecasts and Inventory A sudden spike in returns for a certain item in a specific region is a powerful signal. If Merchandising teams ignore this, their replenishment models will rely on flawed sales history. This leads directly to costly overstocks or, just as bad, missed opportunities because the stock flow was not adjusted. Returns data is a real-time demand correction signal. An example of this is adjusting demand profiles in seaside stores verses city centre stores.
- Strengthening Vendor Negotiations If your returns analysis consistently points to a few poor vendors for high defect rates, and the vendors fail to adjust, it’s time to find replacement vendors, to further avoid lost sales. Training your buying teams to react in the right ways reduces lost sales and reduces the time for which you have open to buy tied up in products that are not available to sell to customers. (Many returns take up to 6 weeks to be back on sale again).
- Some Customers Lie About The Reasons They Return Items. Unfortunately, a high proportion of customers do not state the real reason they are returning something. They often pick a reason that makes it more likely they will get the purchase price refunded. It is important to train returns receiving staff to check the items coming back and edit the data when it is likely that a customer did not give the real reason. The Quality Assurance team can assist them in this. It is also important to identify serial returners and stop taking orders from them.
Conclusion
Stop treating returns as just an unavoidable business expense. The right processes which maximize the use of your returns data can reduce lost sales, improve cashflow and reduce inventory carrying costs. The key is structured analysis, and that starts with equipping your teams with the data literacy and analytical skills to understand what the supply chain is really telling them.
If you would like to explore a detailed framework on how to integrate returns data into your buying and forecasting cycle, you can find it in our Retail and Consumer Goods Industry WIKI.
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Posted by Martin Dugan
3rd November 2025
