Key Insights: Time spent in quarantine lends an opportunity to tackle Spring home improvement projects. Consumers may curb spending due to economic risks from COVID-19, but they will undoubtedly shop more online this year. Multichannel retailers must prepare for more large-item online purchases and returns logistics. Retailers must implement customer centric policies, and technology-driven solutions to protect profits.
2020: A Different Home Improvement Season
Spring is here and although earth continues to rotate in space, the humans living in it are facing a new reality. As a result of COVID-19, people are taking necessary measures such as social distancing, meeting outdoors, and cancelling events of groups over 10. The world is navigating an abrupt shift from economic rise to financial insecurity, as the travel industry struggles to adapt to massive cancellations and retailers close doors to contain the spread. A $394B industry in 2018, The Spring home improvement season is normally the busiest quarter for retailers like Home Depot, Lowe’s and Walmart. While COVID-19 has changed many customers’ priorities and spending habits, mandated time at home in warming weather is a likely recipe for a spike in sales and a welcomed life raft for retailers sailing through these stormy seas.
Shift Toward Online Purchases
One fact is certain: As retailers close brick and mortar stores, online shopping will become ever more prevalent. Last yearm, home improvement purchases were responsible for 34% of online sales. This year that rate will undoubtedly grow. Moreover, as people spend more time at home due to COVID19, they may also spend more time on projects they’ve been thinking about for years. Mandates to #stayhome may encourage people with the time and the motivation to transform their homes into an even more sacred space of mental reprieve.
But as online purchases rise, so will online returns, creating unique difficulties for both customers and retailers. So, what are the most common Spring home improvement purchases? How can retailers turn challenges into an opportunity? Here we review:
Most Popular Home Improvement Projects
Some projects require a significant investment like updating siding, upgrading HVAC units, repairing the roof, or replacing patio furniture. With changes in spending habits and restrictions on inviting 3rd party contractors into your home, consumers may turn to less intensive, less expensive projects. Instead of a brand new sunroom, customers may seek to update their patio furniture, replace lighting fixtures, put up a new mailbox, or paint kitchen cabinets. Perhaps they may focus on purchasing the tools and materials they need for gardening. Either way, this should bode well for sales numbers for retailers who offer these types of goods and supplies.
What Does This Mean for Retailers?
Regardless of the per item price tag, any uptick in purchases during home improvement season is great news for retailers looking to boost business after the holiday season. As brick and mortar retailers shutter their local stores and switch marketing tactics to drive ecommerce sales, they must also prepare for the inevitable returns challenge. Some research estimates that up to 20% of all online purchases are returned. Some customers find the items they purchase don’t work or look as expected. Others discover slight visible damage upon opening the package or that they over ordered a certain item. Whatever the reason, returns present retailers with a considerable logistical headache. And in the case of bulky home improvement items, an inefficient returns process can all but eliminate a retailer’s profits.
Challenges To Return Bulky Items
One major challenge is that a returned item is no longer “new,” which means retailers have to re-sell it at a discount, regardless of its condition. Returned products can lose more than 80% of their value by the time they’re ready for resale. Due to wasted time in transit, mismanaged reverse supply chains, and the manual process of re-shelving. This loss is especially painful for potentially large, high-ticket, home improvement items.By UShip’s estimates, large-item shipping can cost approximately $1.81 per mile for shorter distances and about $0.59 for longer distances. Before a retailer can even consider recovering these costly expenses through resale channels, however, they must create a seamless return process for the consumer.
Shipping bulky items is a particular nightmare for customers, due to higher fees and the complicated logistics required to select a carrier and schedule a pick up. If retailers cannot ease the burden on customers during this process, it may face costs much higher than any logistical challenge. In fact, most customers expect free, easy returns and will reward the retailer through loyalty if they are happy. Yet, many e-tailers still do not include return shipping costs in refunds, and suggest that customers arrange their own delivery through a service like Parcel Monkey. Policies like these can lead to negative experiences, which often result in the customer not shopping with the retailer again.
Returns are clearly a key area where retailers must focus in terms of operational efficiency and customer experience. For customers, in-store returns are often the most convenient method, but store closures in recent weeks make that option impossible. Moreover, many customers do not have the ability to transport bulky items to stores. Retailers must implement creative returns solutions for large-items this home improvement season.
In the past, Walmart launched a “Keep It” return policy, based on the determination that it was more cost effective to let customers keep bulky purchases and give them a full refund, rather than creating a return label and shipping process. Walmart advised that it would use “technology” to monitor potential fraud. Currently, Amazon makes return shipping seamless by contacting UPS directly to arrange pick up of the package from the original shipping address. Similarly, Target offers return pick-up service for large items that typically weigh more than 150 pounds.
Retailers must map the best course of action to recover as much profit from the returned item as possible. Oftentimes, the loss in value is simply not worth re-shelving the item in-stores, especially if the returned item is in need of repair. That’s why many retailers outsource reverse supply chain logistics and resale strategies to technology-driven partners. In these cases, AI driven returns management systems analyze multiple options and determine the most lucrative disposition, such as liquidation, or resale via alternative online channels.
Intelligent, creative solutions should be the number one priority for retailers as they face an uncertain forecast, while navigating an uptick in online purchases this Spring home improvement season.