How retailers can launch a recommerce operation: start with capability analysis
Before jumping into circular business models, retailers should first assess their existing operational capabilities. Recommerce success begins with understanding what systems, data, and logistics you already have — and where you need to improve.
Step 1: Reverse logistics
The foundation of recommerce is how you handle product returns. Retailers should start by analyzing:
- How returns are accepted — in-store, via mail, or both.
- Whether there are existing systems to log returned items.
- If refunds, exchanges, or partial discounts are managed consistently.
- How efficiently returns are processed and how scalable the current workflow is.
Reverse logistics often reveals whether you already have the operational structure to support recommerce or whether you’ll need to adjust or outsource it.
Step 2: Visibility into returned inventory
Once items are returned, ask: Do we know what we’ve got? A mature recommerce operation relies on individualized tracking — unique identifiers, item condition data, reasons for return, and even photos. Retailers that still treat returns as bulk SKUs are missing valuable information that could power resale, refurbishment, or recycling flows.
Creating digital twins of returned items helps teams make data-driven decisions about what to do next — resell, refurbish, recycle, or donate — and allows the recommerce process to scale over time.
Step 3: Evaluate systems and data quality
The final step is to assess how your systems talk to each other. Are product returns integrated into your inventory management platform? Is there a clear data trail from sale to return? The more connected your systems are, the easier it becomes to identify, price, and relist returned goods efficiently.
For most retailers, the goal isn’t perfection — it’s to get a clear picture of your current readiness and to understand which capabilities you should build internally and which to outsource.
Karri: Let's now jump into the actual steps that a retailer should approach this if they're interested in launching the recommerce. Let's start from the capability analysis.
Tuomo: Like with most cases any transformation or any new launch, starting with the first step is just analyzing your capabilities and then understanding what are you good at and what's the current situation. For example, how much product returns you get, what kind of product you get. In the context of recommerce I think there are capabilities that matter more that probably should take let's say 60 or 80 percent of your focus when doing the analysis and then the 20 percent can be done maybe more superficially. So the idea is not to spend hundreds of thousands in consultants doing a sustainability analysis or capability analysis. The idea is just to look at few specific things and understanding are you capable of executing already on top of what you have in place or do you need to do some adjustments or might you elect to actually outsource that capability in totality.
Karri: In maybe concrete examples what are the capabilities that they should be looking into?
Tuomo: They are a bit tied to what you're looking to launch but in general the first thing to look at it's your reverse logistics capabilities on how good are you at accepting product returns. So channel-wise are you able to accept returns in store so just someone actually coming to the store and returning the item themselves or do you have some systems in place where you're capable of accepting product returns via shipping. So kind of for example if you're an e-commerce operator what kind of solutions you have in place in accepting product returns and what is your process there do you offer refunds or partial discounts or similar. So that's kind of the first one that I would look into like how scalable is your reverse logistics operations and what's the state of your product return inventory as that has been processed. So what I mean by that that once your product return process is done where do you see like what's the data that you see. Do you have an individualized item sitting in some system or recorded somewhere where you know its condition and what it is and model and the reason why it was returned or have you just issued a refund and then you have a pile of unidentified items in some store corner or warehouse corner.
Karri: Okay so reverse logistics how is it handled now is it logged into some kind of inventory management system and kind of are you maybe creating a digital twin out of those items that you have physically in some warehouse or some location where you gather all the product returns and probably there's some operational capabilities also related to this process and like what already happens to these items after they are returned.
Tuomo: Yeah so effectively looking at your existing product return process and looking at what's the what systems were used and what's the state of the systems after the product has been returned. I think that would be the first step that I would analyze because it's effectively helping you understand how well identified supply do you have for any for example recent initiative that we would launch. If you look into the product return process you quite quickly understand that is it good enough or are there small parts where you need to adjust something for example all right let's actually instead of generalizing all of these product returns under some bulk SKU let's figure out how might we just bridge the final last mile of that to a place where every item is uniquely serialized at the at the end of that product return process so that anything that you decide to do with the items later is acting on the premise that hey I have a well-recorded list of all product returns individualized in condition and price and all of the needed details and potentially even unique product images.