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Chain Reaction: Mike Kitko of Retail Reworks on Reducing Return Fraud and Recovering Lost Revenue
Andre Claudio
5 min read
Chain Reaction is Sourcing Journal’s discussion series with industry executives to get their take on today’s logistics challenges and learn about ways their company is working to keep the flow of goods moving. Here, Mike Kitko, co-founder of Retail Reworks, discusses the reverse logistics company’s upcoming offering, The Return, and how it helps retailers streamline their returns management processes while tackling serial returners.
Mike Kitko, co-founder, Retail Reworks
Name: Mike Kitko Title: Co-founder Company: Retail Reworks
Our main customer base consists of apparel, footwear and fashion accessories. We’ve also seen significant growth in the home and bedding and luggage industries, as these brands require experienced quality control (QC) partners to efficiently manage the refurbishment of their customer returns.
Which industry has the most to teach fashion about improving their supply chain logistics?
The fashion industry is teaching itself how to improve supply chain practices. From charging customers for returns to more strictly enforcing return policies, brands have reduced return fraud and the issue of serial returners—those who order numerous items only to return them.
Additionally, we’re seeing an increase in brands and retailers encouraging customers to keep the item, donate it or give it to a friend when the cost of returning an item doesn’t make sense. If it can’t be resold as new, it really doesn’t make sense to have it returned.
What is the main thing brands and retailers can do—or stop doing—right now that would immediately improve logistics?
Utilizing drop-off networks for returns allows brands and retailers to eliminate the cost of providing shipping labels and paying for individual parcels. We are working on launching The Return, which will offer locations in nearly every city and town where customers can drop off their returns with a live person who can immediately flag—or reject—those attempting to beat the system.
What is your company doing to make the movement of goods more sustainable?
The Return is set to solve many issues in this area. By utilizing logistics networks that are already running daily, it will significantly reduce the carbon footprint for brands. Allowing customers to drop off returns at locations in their local area will decrease the number of shipments processed through individual parcels.
Retail Reworks offers a one-stop shop solution for customer returns and the sustainability goals that brands are striving to achieve. We manage everything here—from processing to donations, resale and recycling. In the past, brands and retailers had to send shipments to various service providers across the country to achieve the results we now offer by consolidating everything in one place.
When it comes to supply chain logistics challenges, there are things companies can fix, and things that are beyond their control. How can the former help the latter?
Learning, planning and knowing that things are sometimes outside their control is crucial. From shipping delays to QC issues to fulfillment and transportation delays, brands and retailers have experienced this countless times. They need to plan further in advance and have shipments arrive earlier, either to them or their warehouses, to allow extra time to avoid delays and problems in the supply chain.
What areas of logistics aren’t receiving the industry attention they deserve?
Reverse logistics and customer returns processing service providers play a crucial role. One of the major reasons returns are so costly is that returns management for brands and retailers hasn’t been efficiently handled.
Third-party logistics (3PLs) charge high prices to sort through what is received as new and what can’t be returned to stock. We see many one-time projects where returns are rejected for issues that could be fixed in seconds—missing hangtags, missing inserts, garments needing pressing, stains, odor, shoes without dust bags and more. Efficiently managing customer returns for brands requires more than just a desk with a bottle of Febreze and a lint roller. It requires proper packaging, trims, folding and packaging standard operating procedures (SOPs) and a full range of cleaning and garment finishing services and equipment to deliver real value to brands and retailers.
When it comes to creating efficiencies, there are quick wins and longer plays. What are a few things your company is doing to help its partners succeed on both fronts?
For quick wins, we help brands and retailers recover lost revenue from returns that couldn’t be restocked. By processing thousands to tens of thousands of rejected returns and restoring them to new condition, we prepare them for inventory in just a few days. This enables brands to recoup some of the revenue they lost when the customer returned the item.
For long plays, when brands and retailers partner with us and send all their daily returns, we significantly increase the percentage of returns that can be resold as new. Previously, 50-75 percent of returns would make it back to inventory, but with our services, that number rises to over 95 percent. This not only speeds up the process but also allows them to sell returned items as new, which is the most effective way to recover the revenue lost from shipping and processing returned goods.
What logistic challenges do you think the industry is currently facing?
The day-to-day challenges of unreliable transportation timelines, rising costs and a reduced workforce are all hurting the bottom line of brands and retailers who need everything yesterday. Any delays can result in lost profits.
Are you optimistic about the state of supply chains in the next few years?
Certainly. I believe there are many smart people out there who are aware of the problems facing today’s supply chains and are working quickly to produce solutions. Technological advancements and artificial intelligence (AI) will only help.
