One area of inventory management that we challenge eyecare professionals to do in 2017 is to eliminate returning and exchanging eyewear.
Unfortunately the advantage of Being Able to Return Product costs everyone. Suppliers, eyecare offices and even the consumer. It is an inefficient way to do business, because the buyer is not accountable to make good buying decisions.
I don’t care if the rep says if it doesn’t sell you can always return it. Remember every time you have to return a frame, you are losing money.
I would challenge you to look at your return rates, your vendors all track this. If you have a return rate over 8%, you need to fix it. High returns could be due to a myriad of reasons:
- Poor Buying Habits,
- Poor Inventory management. Not buying what sells.
- Staff lack of education about the product.
- Staff/buyer turnover.
- Not enough product representation on the boards. Lack of commitment to the product.
- Too much product on the boards in order to get inventory turns.
- Product is Not merchandised effectively.
- Product is not shown.
- Product is over-priced for what it is.
- Fear of selling the product.
- Prejudging patients.
Returns are killers to every eyewear manufacturer. I would imagine it is one of the reasons that manufacturers are now going direct to the consumer. Returning eyeglasses leads to increased costs. Not only are you paying the cost in the higher price of frames, but you pay again by returning product.
What to do? Pretend there is NO return policy. The return policy should have NOTHING to do with purchasing an eyewear collection. The #1 consideration in buying any frame collection should be the Sell Through! That is the one and only way you make money in frames. NOT Returning Product.
Just because a frame is sitting, does not mean it’s unsaleable. It could mean, it’s in a bad position in the office, it has never been shown or tried on, you could be carrying too much product (see inventory management). Remerchandise the product, focus on showing it to every person, that is how you get sell through.
No matter how you look at it, you lose money by returning frames. The keys to controlling returns: work with your reps, buy only product that sells, and develop a mark down program that can work for you.
The Cost of Returning Eyewear: Control Costs By Controlling Returns
- Wrapping/ packing
- Trips to Post Office if applicable.
- Time spent with reps
- Postage in and out
- Cleaning Products
- Time re-tagging, inputting new products
- Time taking out of inventory.
- $1.25 per frame/ return/ postage (estimated)
- Restocking fees can add up to 10%
- Affects cash flow as waiting for credits to come in.
- Inventory fluctuations, open spaces on board, do not look good.
- Frames not on board, can effect sales.
- Higher frame prices in general.
- Patient ultimately pays cost and may leave
- Product that is not re-saleable often goes to those discounter who advertise 2 pair for $39.00
- Vendors Stock less product- don’t want returns- ergo backorders.
4.) Less New or Unique Products from Vendors
- Vendors stick to basics due to lack of committment from retailers
5.) Tougher Return Policies
- Less Support Materials
- Tougher about any returns
6.) Less Service from Sales Reps
- Reps don’t see often to service high return retailers. Most Reps are independent contractors, why should they continue to service you and lose money?
The High Cost of Returns
$80.00 Cost per frame
x 2 Number of frames
$160.00 Total investment
Cost if You Return Frames
– $16.00 Interest at 10% (cost of having inventory on board)
– $ 2.50 Shipping (both ways)
– $ 10.00 Labor
– $19.20 Restock fees
– $49.70 Total out of Pocket Money to return 2 frames
Cost to Mark Down Frames
$80.00 Cost per frame
x 2.5 Mark up
=$200.00 Retail Cost x 2 Frames for a total of $400.00
$400.00 Total Retail Price
2 Frames @ 50% mark down
$200.00 Price after mark down
– 160.00 Cost of Product
$40.00 Net Profit
It makes sense to have a Sale Area and mark down product or use as 2nd Pair Board. Better customer satisfaction and loyalty.
Something to think about.