What should I ask about a clothing store’s return rate and who handles returns?
Ask for the return policy, a record of returns by month, and who processes them. Then find out how much comes back to stock, how much is written off, and whether suppliers credit anything. The books should match what staff describe.
Returns reveal how well a clothing store buys and sells. Begin with the written policy and any signs or receipts that state it. Ask when it last changed, and whether staff ever bend it for favoured customers. Informal exceptions can create expectations you inherit. Next, ask for the return records: reasons given, items affected, and whether they cluster around certain brands, sizes or seasons. Frequent returns of one line may point to fit or quality problems. Ask where returned items go. Some are resold at full tag, some are marked down, and some are damaged. Find out how that is shown in inventory and in the financial statements.
Then look at the work itself, because returns are labour as well as lost sales. Who handles returns during a busy Saturday, and who handles online ones, if the store sells that way? Ask whether any supplier takes back unsold or faulty goods, and whether those credits actually arrive. A long-serving employee who deals with every exchange may hold knowledge that is not written anywhere.
Your accountant can help you see whether write-offs and credits are recorded consistently from one month to the next.
Key takeaways
- Get the written policy and ask how often exceptions are made.
- Look for patterns in what comes back, by brand, size and season.
- Trace returned items through inventory records and supplier credits, and ask who is responsible for each step.
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Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
- 02Business Development Bank of CanadaGovernmentWhat are the steps to buying a business?
- 03Business Development Bank of CanadaGovernmentUnderstanding post-merger operational integration
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