Returns – A New Benchmark To Measure
It was reported that Black Friday was a successful day with revenues increased over last year’s reported sales for the retail market. It was cheered as an indicator of likely increased sales revenue for the entire Christmas season. However, there is another benchmark that needs to be evaluated in light of projected increased sales revenues and that is returns.
Returns are very expensive for many reasons and the percentage of retail returns is skyrocketing, allegedly up 3-4%. This is a moving target, though, and the exact number will not be fully realized until after the Christmas season is over. These much higher than historically seen return numbers have a dampening effect on the increased revenues hoped for.
The reasons for the alleged revenue growth for the season tempered by returns is worthy of consideration. There are two issues colliding. The first is returns due to lower cost alternatives located elsewhere, particularly the Internet. The second reason, equally damaging, is the reality of “buyer’s remorse”. People buy emotionally and then realize that their budget does not allow for such expansive purchasing and thus return their purchases.
The effect of a return is twofold – it means both lost revenue as well as the high overhead associated with managing the returns. The combination of deeper discounts and returns is not only reducing the gross revenue expectations but also further reducing the profitability of a business.
Our economy remains very fragile; the decline remains in control. While so many are wanting to project growth, reality continues to dictate otherwise. We remain in a decline and must operate with this in mind.
