According to the National Retail Federation, customers return about 20% of the goods they purchase online.
Some of your customers may be in the midst of their busiest time of year. However, according to the National Retail Federation, customers return about 20% of the goods they buy online. And that is an expensive proposition for e-tailers. Most of the time, returns signify that a seller has twice paid for shipping—to and from a customer—without making a sale.
The time-consuming process of inspecting and repackaging returned goods costs money. The merchandise must be returned in good condition, which is a big IF. In addition, the retailer is gambling that the item won’t go out of style or run out of shelf life before it can be resold. Even brand-new goods may wind up in a liquidation warehouse or on the trash heap because it is unlikely that most returns can be resold at full price.
Your e-tailer customers should think about donating returned merchandise rather than throwing it away or selling it to a liquidator, where you can’t control brand identity. The resulting tax break might be quite substantial, and it might even be more profitable than reselling the goods at a loss.
However, simply giving the items to a nonprofit has its own challenges. The retailer is responsible for conducting due diligence on each organization, assuring that it will accept the offer, determining how it will be valued, and determining how and where goods must be delivered.
For e-tailers, organizations that accept gifts-in-kind do the legwork. The majority of overstocks and returns will be accepted by these organizations at any time of the year, whether they consist of a truckload or a few cartons, and they will make sure the items go to nonprofits that meet the necessary criteria.
Every year, high-quality, brand-new items are donated to American schools, churches, and non-profit organizations through the kindness of donors, enabling them to stretch their budgets, accomplish more with less, and even expand services.
Donated goods range from office supplies, books, clothing, crafts, and a wide range of other items to educational products, safety supplies, and office supplies. Many of the top businesses in this nation have found that in-kind donations have a huge positive impact on their bottom line while also doing good. Giving in kind is satisfying and ensures that a company’s products won’t be sold on the open market or have their brand compromised. Furthermore, the company may be eligible for a significant tax deduction.
According to Internal Revenue Code Section 170(e)(3), Regular C corporations may deduct up to twice the cost of donated goods when they donate inventory to 501(c)(3)-eligible nonprofit organizations.
The cost of the donated inventory plus 50% of the difference between cost and fair market value, up to a maximum deduction of twice the cost, are allowed under the tax code.
For example, if you buy a product for $10 and sell it for $30, the difference is $20. Half of $20 equals $10. So, a $20 deduction is equal to $10 (product cost) plus $10 (half the difference). $20 is an allowable deduction as long as it doesn’t go over twice the price of the item. It’s as simple as that.
There is no single solution to the problems brought on by customer returns. However, giving goods in exchange for money can be a significant component of the solution for your online business clients and will undoubtedly benefit others.
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