May 31st, 2019

How to Turn Distressed Inventory into Incremental Revenue (And Create Happy Customers)

Dealing with returned goods and overstocked items is nothing new. However, thanks to the growth of eCommerce, post-retail sales have soared, totaling $554 billion in 2016, and growing at an average rate of 7.5% every year since. This “reverse supply chain” has become an incredible avenue for companies to recover some of their losses — and it’s a smart way to make the most out of a bad situation.

But like all things, selling B-Stock is only advantageous when done correctly. If not appropriately managed, secondary channels can be just another headache for retailers instead of the bottom-line boost they’re intended to be.

So what do retailers need to know to make a go of it? Before we tell you what works, let’s first break down what B-Stock is, and what you need to avoid when you’re trying to resell.

What Is B-Stock, and What Makes It so Complicated?

A-Stock: New, unopened, fully functional product

B-Stock: Any non-new inventory, which is fully operable

Defective: Inoperable inventory, which cannot be resold without refurbishment and is often recycled/destroyed

When it comes to the different levels of stock quality, the above descriptions are a good general rule of thumb. However, the B-Stock category alone is pretty extensive and can refer to products that are out of season, non-defective returned products, overstock, refurbished goods, and much more. When it comes to these types of products, it’s easy to understand why B-Stock is one of the biggest challenges for manufacturers:

Reason 1: When things are left unsold, you slow down your sales cycle. When businesses have to deal with returns and other unsold goods, they incur restocking fees, additional shipping costs, and more to manage B-Stock items. Not only does this take much-needed resources from A-stock items, but you’ve also flatlined your revenue and profit possibilities on the B-Stock inventory until you can get them back in front of the customer.

Reason 2: One of the biggest problems is significant inventory volumes. Here’s the first question most businesses need to ask when items are returned, have been overproduced, or need to be liquidated: Where are all of these items going to go if they’re not on the store shelves? By keeping unsold items in your warehouse, you’re crowding out new stock, and taking up valuable space housing product that isn’t your first priority.

Reason 3: If managed incorrectly, B-Stock can damage your customer experience. One of the things we’ve learned time and time again is the potential for returns and exchanges to ruin your customer experience. Taking back stock is one thing, but managing the customer through a smooth, effortless transition with B-Stock is entirely different. First, you’ll need to discount the merchandise, and then you’ll need to ensure that the quality of your B-stock product matches customer expectations. If not, your customer may be less inclined to shop with you in the future.

Regardless of which reason is most prevalent to your situation, there’s one truth about returns. When it comes to eCommerce, this is the reality: There will generally be a linear relationship between revenue and consumer returns. As eCommerce revenue scales, so too will the relative amount of B-Stock generated. And while B-Stock certainly comes with its challenges, it also presents an opportunity to turn what may otherwise be a drag on the P&L into a new revenue line. Thinking of B-Stock as an inventory type, and effectively marketing it on the most appropriate eCommerce channels may ultimately benefit your business. That’s why it’s crucial to have the right strategy and operations in place. Here’s what you need to know to get started.

The Secret to Success: Effectively Managing Returns and Reselling

B-Stock is a factor of the consumer market, and returns and reselling are at the heart of making your B-Stock profitable. Here’s what you need to know about each of them to make them a success for your business as you attain the highest possible return on your secondary-market merchandise.

Returns

1. Consideration 1: Time equals money. When it comes to strategy for your organization, most people want a short time frame when it comes to managing returns. That’s where an efficient, streamlined system for processing becomes essential. Your shipping and returns plan should be optimized so it’s not expensive to coordinate a return, ship the product back, issue a refund, and more.
2. Consideration 2: Returns require additional labor. Let’s face it — your returns and exchanges will cost more if the product requires product assessment, refurbishing, relisting, or destruction. With these additional costs and touches, your returns process can become lengthy, involved, and very labor-intensive, cutting into your bottom line.
3. Consideration 3: The right plan will include a quality assurance function to help manage product and customer expectations. When your customer returns either an A-Stock item resold as B Stock or begins the B Stock return process, they might already have a negative feeling associated with your product or your company. This could culminate in not only losing this one sale with a customer but it could affect their future purchases with you as well. In addition to this, customers could also leave poor reviews, souring the relationship you have with other customers. What does this mean for you? You need to focus on reassuring the customer with a quick, effortless process that answers all the consumer’s questions and encourages them to purchase again.

Reselling

1. Consideration 1: On average consumers may expect a minimum 20% discount on refurbished products. When it comes to the eCommerce world, there’s a lot of discounts out there — in fact, some people would say everything is at a discount. What we’ve learned over the years is that customers expect a 20% discount on most refurbished items, which we have found to be the optimal rate for encouraging customer demand within our clients’ businesses.
2. Consideration 2: However, how you price your B-Stock items for resale is tied directly to your revenue strategy, so it varies from brand to brand. Even though the standard discount might be ~20%, it may not be the best choice for your brand. Instead, your B-Stock should be competitively priced to what consumers expect, but not so significantly that it hurts your brand. It’s all relative! After all, you’d likely never see Apple products heavily discounted, but if they were, they’d sell like hotcakes even at a 10% discount. On the other hand, a 10% discount off of a vase or non-technological household good might not have the same attractiveness.
3. Consideration 3: You might choose to offer steeper discounts. Some brands prefer pricing aggressively (yet profitably) because they’re losing dollars in holding costs, and are unwilling to take on the burden of taking back the product, or hoping a retailer buys the inventory. Again, this comes down to defining your strategy to make a pricing decision that’s best for your business.   

Here’s How Ally Fits Into the Picture.

At Ally, we sell A-quality products on all channels through our multi-channel solution, so we understand the intricacies of working with marketplace channels like eBay and Amazon, and bring extensive expertise to the table. That’s why we’re able to aggressively sell B-Stock inventory types on those channels — because our clients have been there before. By saving you valuable space, we leverage marketplaces in a way that is attractive to our clients and ensures that they’re not taking the attention away from their A-Stock inventory opportunity. We have the strategic and analytical prowess to maximize revenue and profit on distressed inventory types, as well as the operational services to accommodate the most significant obstacles you’ll face as you accommodate reverse logistics.  

At the end of the day, when consumers need to return products, they can generally be disgruntled for any number of legitimate reasons. At Ally, we take an empathetic and unscripted approach to customer service, where delivering a strong customer brand experience is the ultimate outcome in mind. You will have returns in eCommerce — there’s no avoiding that. But with Ally, you’ll build an experience that speaks to your professionalism and brand values. After all, happy customers tell their friends about you, and the happiest customers buy again.

Craig Haynor is the VP of Account Management and Operations at Ally Commerce. Ally partners with brand manufacturers to drive their direct to consumer business, combining eCommerce expertise, technology, and operational services.

Craig Haynor

Posted in Brand Manufacturers, Direct to Consumer, Fulfillment

November 2nd, 2018

Holiday Shopping Lessons Learned — How Brands are Preparing for the 2018 Season

The holiday season is upon us — is your brand ready?

According to Internet Retailer, U.S. shoppers are expected to spend more than $119 billion with online retailers between Nov. 1 and Dec. 31 this year — an estimated 15.5% (or $100 billion dollars) over the same period last year.

This is great news for brands as a whole, but with progressively noisy channels, there’s no guarantee that your brand will benefit from this momentum. Taking into account this season’s predictions, our own experience, and lessons that we’ve learned from our clients over the years, here are our recommendations for setting your brand apart and planning strategically this holiday season.

First, you need a strategy.

To set your brand up for success, it’s critical that you plan ahead and ensure all teams are aligned and prepared to execute. Here are three steps to do this effectively.

STEP 1: Build your plan.

Focus on two important questions: What are you trying to achieve, and how will you measure success? Brand manufacturers may have vastly different answers for this question, ranging from getting new customers to driving record revenue numbers, but the result is all the same: Plan for your success, and then outline how to measure each point over a period of time.

STEP 2: Communicate the plan to all key stakeholders.

There will be a lot of moving parts as the holiday season gets into full swing, and you’re only going to be as strong as your weakest link. Communication is critical to ensuring that everyone is on the same page. Alert the stakeholders of your plan and express your expectations of their fullest extent, impressing milestone and timelines frequently so that everyone understands their responsibilities and goals.

STEP 3: Rely on your data.

Agility is key. The great thing about eCommerce is that you can monitor metrics and make changes in real-time. Swim in your data, and don’t hesitate to flex your strategy to get the outcome you need. This means thinking critically about how you’re measuring your KPIs and also how you’re building your dashboards, as these data points will inform your decision-making as you follow and react to important trends throughout the season.

Key Considerations for the Holiday Season 2018

Here at Ally, we’ve helped many different brands develop their eCommerce strategies year after year. We know what works, what doesn’t work, and what you need to be prepared for when it comes to planning your holiday sales strategy. Here’s our expert advice for pricing, inventory, shipping, and management this holiday season.

Pricing

The holiday season unofficially kicks off with Black Friday and Cyber Monday. Many consumers complete most or all of their holiday shopping for the entire season on these two days. Our recommendation is to discount site-wide across the catalog, while also including specific spike opportunities.

When it comes to eCommerce channels, the best strategy is to recreate what happens in the brick-and-mortar experience as much as possible by including deep deals and doorbusters. A 40” TV doorbuster at Walmart is guaranteed to bring people to the door — why not recreate this strategy to bring the same traffic to your site?

It can be difficult to strike the balance between competitive pricing and pricing to make a profit. We recommend to look at profitability across the entire promotion as opposed to per-transaction order economics. If you’re not sure how to approach discount levels, a good rule of thumb is to start with a 20% discount threshold across the catalog, with doorbuster discounts rising as much as 70% on select items.

Inventory

Long-lead planning for the holiday inventory spike is vital to your overall success — and the sooner you start planning for the influx, the better off you’ll be. To get started, pinpoint where you want to see a return on investment — be that engagement, sales, or profit — and then map your specific goals backward from that final point. With this tactic, you’ll discover what will happen from an elasticity standpoint and allow you to plan for any eventuality.

To optimize your data and provide a better ROI, allocate your inventory by the channel where you want to capture new customers. This works because you’re not just supplying a demand — you’re anticipating the needs of your customers.  

Shipping

Christmas is on the 25th every year, but, without fail, many consumers will still wait until the last minute to order gifts. To make things even more complicated, the day of the week that Christmas falls on can significantly impact your shipping logistics, delivery, and messaging. For instance, when Christmas falls at the beginning of the week (coincidentally, like it does this year), your last days for delivery really fall in the previous week.

“Last day to order” messaging can help dissuade customers from procrastinating. You’ll also want to keep in mind how capable your systems are for managing two key points: your organization as a merchant in terms of fulfillment, and your logistics provider in terms of distance from the origination point to the final destination. To do this, try establishing clear expectations for both your fulfillment process and your logistics provider, and understand what your most likely pain points will be.

Returns

Here’s the reality: Your returns will scale with your order volume, and your best plan of action is to go on the offensive. Besides planning for a minimum returns threshold in terms of reverse logistics, customer service, and payments, you’ll also need to verify that the product you are selling is the one that is actually being delivered. This means understanding the fulfillment process, verifying that each of your listings is accurate, and making sure that the products listed are the same ones that are being shipped.

For instance, it’s not uncommon for doorbuster products to have unique SKUs, which can easily upset accurate fulfillment as the rush of order volumes hit. You should also ensure that any and all temporary warehouse resources are sufficiently trained on the importance of good operational processes and how that maps to all requisite customer experience SLAs.

Another great way to treat returns is to automate parts of your process while customizing other areas that require it. For instance, Ally works with its customers to involve people in the returns process in a scalable manner when and where appropriate. This provides an automated returns process for goods at a lower, say $25, value, while adding a personal touch with an intent to save the sale for customers at higher spending, say $1000, thresholds.

One of the most important things to understand about the customer service experience is that assuring the customer that the product will be returned “no questions asked”. The next thing to remember is to understand why the product didn’t meet the customer’s need. To help manage this process, have a CRM system in place that allows for the disposition of all returns. This feedback can better inform your business and increase customer loyalty when effectively leveraged.

Looking Forward

Unlike years past, the 2018 holiday shopping experience will be vastly different thanks to big retailers like Toys R Us and SEARS no longer dominating the traditional retail sector.

By keeping our tips and takeaways in mind as you build your 2018 holiday action plan, you’ll not only improve your revenue and processes, but you’ll also better understand your customer and cement your place in a retail environment that is swiftly moving to eCommerce.

If you’re looking to build or expand your direct to consumer eCommerce business, partnering with an established multi-channel partner is the best way to get started. Contact us to learn more.  

About the Author: Craig Haynor

Craig has served as the VP of Account Management and Operations at Ally Commerce since 2015. Before that Craig spent 12 years working in various sales, marketing and operations roles for a brand manufacturer in the musical instrument industry. He had a front-row seat to the disruption ecommerce introduced to the company’s traditional retail distribution network, and then to the brand itself as they formulated and executed upon a direct-to-consumer strategy.

Craig Haynor

Posted in Brand Manufacturers, Customer Service, Direct to Consumer, eCommerce Technology, Fulfillment, Pricing

August 29th, 2018

Walmart Versus Amazon: A Race to the Bottom on Price

In this four-part series, we’re taking you on a deep dive of today’s brand manufacturers’ top challenges to provide clarity on the current market environment and empower you to adapt faster.

Amazon and Walmart, two of the largest and most influential brands in the world, are in the midst of a retail battle that continues to make headlines. As the lines separating traditional and online retail continue to blur, competition is heating up and the stakes are higher than ever. In an attempt to win customer loyalty in this new era of retail, both are dropping prices at a rapid rate. The result? An uncertain future and dwindling profit margins for brand manufacturers.

Here is a quick recap of each retail giant’s place in the market and how today’s brands can respond to the escalating pressure.

Walmart: The Brick-and-Mortar Kings

On a mission to help customers save money and live better, Walmart is the top brick-and-mortar retail store in the world. With the recent launch of a new website, announcement of free 2-day shipping, and a large investment in new technology, Walmart is taking an aggressive approach to compete for the top spot online as well. In the first quarter of 2018, Walmart grew eCommerce sales by 33% and increased revenue by 4.4%. Despite this impressive momentum, gross margins decreased by 23 points, in large part due to pricing pressures brought on by Amazon.

Amazon: The eCommerce Gold Standard

Amazon, the most customer-centric company in the world, is the uncontested winner of the eCommerce space. Amazon’s first quarter earnings allowed the company to increase revenue by 43%. In an effort to compete with Walmart in all aspects, however, Amazon has recently begun building up their brick-and-mortar capabilities with Amazon Go.

Here is a cross-comparison analysis of each retailer’s prices:

Source

Responding to the Retail War

As Amazon and Walmart continue to cut prices to compete with the other, brand manufacturers are struggling to turn a profit. The group taking the hardest hit? Those overly reliant on these third party sales channels to reach their customers.

In an effort to meet each retailer’s growing demands, brands are being forced to rethink their sales strategy. While the answer is far from simple, not all hope is lost. A diversified, multi-channel sales strategy can help brands rediscover profitable growth. Many are adopting a direct to consumer approach to face the realities of a new retail environment and meet the changing needs of their customers.

If you are brand manufacturer struggling to navigate the increasingly complex market, we are ready to serve as your partner in profitable growth. Contact our team to learn more.

Dave Kart

Posted in Amazon, Brand Manufacturers, Pricing

August 10th, 2018

Top Challenges for Brand Manufacturers

An Introduction to a Four-Part Series

No industry has gone untouched by the massive change stemming from recent digital disruption, but nowhere does it seem more apparent than with brand manufacturing. Big brands are working to hold on as smaller brands fight to emerge through the digital noise. New technology is disrupting traditional supply chains and revenue streams, pushing modern brands to pursue growth in new places.

At Ally, we have the opportunity to speak with brand manufacturers on a regular basis about their unique challenges, big wins, and growing fears. Across the board, brands are looking for a way to future-proof their business by unlocking sustainable growth in an unstable market environment.

Here are just a few of the common problems we hear from brand manufacturers on a regular basis. We will be diving deeper into each topic in our four-part series. Here is a snapshot of what is to come.

A retail apocalypse.

Brand manufacturers are being forced to evolve their sales strategies to keep up with an unprecedented pace of change in the retail world. Nearly 9,000 retail stores closed up shop in 2017, and the ‘retail apocalypse’ will continue as shopping continues to shift towards online channels. What will this mean for brands and how can brands build a strong online engine? Stay tuned for Part 1 of this series to learn more.

Fierce competition from digitally native brands.

Established brands are struggling to maintain a loyal customer base as they compete with vertically aligned and digitally native sellers, seemingly sprouting up overnight. Consider Dollar Shave Club and Casper. Both of these brands gained instant popularity and quickly snagged market share despite competing in industries that have historically been dominated by a handful of legacy brands. Casper is especially interesting because the idea of purchasing a mattress online (without testing it out in person) previously seemed inconceivable. This is further proof that the direct to consumer approach is a requirement, not a trend; and no matter how established or impenetrable a brand may seem, it must stay agile and customer-centric to stay relevant.

Race to the lowest price: Amazon vs Walmart.

Competition between the two retail giants, Amazon and Walmart, has skyrocketed, causing prices to plummet. A recent study has shown that on average, Walmart prices are 34% lower than Amazon’s. But this race to the bottom has directly impacted margins of sellers as each attempt to win in the multi-channel space. Brands are required to cut their wholesale prices drastically, and in some cases, brands may lose money on sales if they meet the ‘low price’ demands.

Amazon’s growing dominance.

Amazon, the force keeping all brand manufacturers up at night, has established its dominance with a market share that’s expected to reach 50% by 2021. Brands are searching for ways to play nice with the retail giant without completely eliminating their margins. But as Amazon’s power grows, brands are losing control of the channel and need a viable solution. So how do brands leverage the enormous reach and traffic of Amazon, while building a direct to consumer channel as well?

Thanks to new technology and quickly shifting consumer preferences, today’s brands are facing massive disruption and profit pressures. Only the brands willing to embrace change and the speed of innovation will survive. In this four-part series, we’re taking you on a deep dive of the top challenges brand manufacturers are facing today to help you paint a clear picture of the current market environment and better prepare for what lies ahead.

Dave Kart

Posted in Amazon, Brand Manufacturers, Direct to Consumer, eCommerce Technology, Pricing