Turning a negative into a positive always sounds much easier than it actually is, but nevertheless some manage to transform tougher times into an accelerated business opportunity. An example is reverse logistics - where channel companies are turning the fact that end users and vendors alike keep on wanting more for less into a key advantage.
As selling gets harder and margins shrink, end users continue to demand yet more improvements to customer service and value for money. OEMs, manufacturers, retailers and distributors have been faced with spiralling volumes of returns, particularly following the 1997 EU Directive on Distance Selling, which stipulates that consumers have a right to return products they have purchased, even without a reason such as the product being faulty.
Then you have excess, end-of-line and cancelled orders, and on top of that, retailers -- and resellers -- may well return stock due to inventory miscalculations, failed promotions, or simply to refresh the products they are offering.
Peter King, managing director of Westcoast asset management division WAM Europe, agrees there is a good story about reverse logistics, which he says few in the market currently offer with any scale or sophistication.
WAM, based in Theale near Reading, is supported by facilities at Nottingham and Milton Keynes, and has been around for eight years. It is continuing to see its business go from strength to strength.
“We have eight staff including [chief executive] Howard [Strowman],” says King (pictured, right). “We buy from manufacturers, other distributors to a certain extent, and quite a bit from big store groups as well. It is all about helping them with their stock issues. We are there to maximise their return when anybody communicates a problem they have and they are going to lose money.”
All WAM’s refurbished IT and consumer electronics products are fully checked, loaded with the latest software where applicable, and re-boxed if necessary. Consumer electronics has been the biggest part of the business - but IT is growing, especially as consumer and business technologies converge. “The main thing is we are at the back end,” says King.
WAM is able to use the brand, systems and facilities - the £1bn worth of market muscle - of Westcoast. According to King, that not only helps when WAM’s traders are cold-calling and doing of-the-moment deals with a wide range of customers, but also enables it to smooth out the back-end processes and even get economies of scale by tapping into the infrastructure of the larger company.
Partners include large vendors and retailers with big reputations - and Westcoast itself works with HP’s Renew programme - although many WAM deals are of necessity confidential. “They [HP Renew] are doing very high-quality refurbishment,” says King. “But we are selling product well into the second-tier market. So we work alongside Westcoast more, rather than doing the same thing. And the all-important thing is that it does not get back into the manufacturer’s existing channel.”
Quantities can be large or small and each deal is different, making for a varied and exciting role for WAM’s small team, which builds up relationships by taking an interest in individual customers and their specific inventory problems and refresh cycles.
As Jack Strowman (pictured, bottom right), senior trader at WAM Europe, notes, it can be counterproductive to call someone daily to ask if they have any stock problems that need fixing if that particular firm only struggles with returns every week or every other month. “And if you get the buying right, the selling becomes a lot easier,” says Strowman.
Gary Richards (pictured, left), head of purchasing for consumer electronics at WAM Europe, adds that it is as much about the potential for remarketing the product in a way that means the manufacturers and retailers get the benefit. It is a trust-based partnership, with details thrashed out between both parties to ensure the customer is not then, for example, undercut by sales of its own refurbished product down the track.
“With a lot of our returns, we are dealing with brands or own brands and we have to make sure we are managing their brand. We have a responsibility to them to ensure the product is remarketed responsibly; we are not competitors,” says Richards.
Buyers of remarketed product that has come through WAM’s processes will be unable to tell where it has come from, what has happened to it, and which retailer has previously sold it. Onsite engineers use their wide-ranging skills - which need to be updated frequently - not only to troubleshoot and repair the kit where needed, but to clean off all the data, including the removal of identifiers such as barcoding and onboard software.
Its eight-month-old B2B trading site, WAM Direct, has signed up 800 customers already and WAM plans to expand its benefits even further over time.
“We warranty the products,” Richards adds. “But for me, the excitement and the big challenge is constantly identifying new opportunities. And it’s about solving problems.”
Others are jumping in where many once feared to tread. Early April saw networking giant Huawei sign up mobile and broadband reverse logistics and repairs firm Anovo to perform UK repairs, configuration, returns avoidance and technical support - expanding the duo’s services partnership.
November saw e-fulfilment and returns logistics firm iForce launch a refurbishment and remarketing arm to its primarily retail-focused customers. The strategy should not only help iForce, but increase margins for the customer. The service is a boost to iForce’s existing reverse logistics operation, the firm said, hinting also that it could be expanded to incorporate “any high-tech” product -- not just CE.
IForce has 500 staff and 1.1 million square feet of warehouse space in six UK locations. Its reverse logistics customers include Tesco, Screwfix and House of Fraser.
Mark Kiteley, head of refurbishment and remarketing at iForce, says in a statement that up to 85 per cent of all returned product can be refurbished and remarketed.
“The product leaving the refurbishment process is as good as new,” Kiteley claims. “The end customer gets a bargain - at least a 20 per cent discount on high street retail prices - and still receives the same consumer protection provided by any retailer, such as the Distance Selling Regulations and the Consumer Protection Act.”
Kiteley has designed an iForce refurbishment process and the firm will refurbish returned product for a fixed cost. The company then sells on the refurbished items, with an iForce warranty, and expansion of the current service has already been flagged up since the service went live in September.
IForce manages the returns of product at its Saltley processing centre in Birmingham or at dedicated client facilities, before selling or disposing of it, like WAM, as directed by the client. Irreparable product will see usable parts recovered and the rest scrapped in accordance with the WEEE Directive on waste. Recovered credits for precious metals are also returned, according to the company.
Remarketing at iForce is done via its B2B auction site, and the company plans also to launch a B2C site for bargain-hunting consumers. Returns are inevitable for both retailers and manufacturers, and data can be harvested during the process, says iForce.
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