An Unexpected Result Of The CPA: A Sub-Industry Emerges From The Act

South African consumers are expected to return tens of millions of rands of merchandise purchased before Christmas, according to Paul Greenberg, Chairman of recently launched online wholesaler

The introduction of the Consumer Protection Act in South Africa has increased returns dramatically said Greenberg. Retail customers who are notsatisfied with their purchases are increasingly returning product back to stores, and the stores are welcoming returns often without question. “A whole new market is emerging, where small businesses who are looking for cheap product to resell will take these returned goods and sell them to buyers who cannot afford to pay full retail prices.’’

The Consumer Protection Act: fuelling a new segment

‘’There are a number of sections in the Consumer Protection Act that allow consumers to return goods to suppliers, and there are many reasons why consumers are returning goods,’’ says Greenberg. Many of the larger retailers will take products back and pay refunds whatever the reason and usually the right to a refund depends on the customer’s reason for returning the product. ‘’Some shops will take back gifts without question, particularly if it is their own brand of product, without asking to see a receipt or other proof of purchase.‘’

Furthermore, the growth of online retail in South Africa is also growing the returned goods market because of the Consumer Protection Act’s cooling off period and a customer-centric culture where retailers accept that people change their mind when they physically see the product they bought online. Returns are often a good thing for a retailer looking to grow customer loyalty and cross-sell to other purchases.

Going online, which operates warehouses in Johannesburg and Cape Town, is hiring individuals to handle the influx of returns expected to flood into the company’s space over the next four months. Going buys returns from retailers looking to clear their shelves for new product – for resale to smaller retailers or wholesale online. “It’s already started to get busy,” says Greenberg who recently started the company together with Black Empowerment Group Amabubesi.

Typically, Going’s business begins to pick up in November and December when small, independent entrepreneurs and informal traders stock up for theholiday shopping season. As post season returns start to come in, inventoryrises sharply, giving buyers more of a selection and allowing them to buildinventory while it’s available.

Going’s customers range from small-time wholesalers who work primarily off websites such as Gumtree, to suburban discount retailers. Those demographics may not have access to volume discount goods that larger retailers do.

“We provide a liquid marketplace and sell product that allows small businesses to make profits. It’s primarily the type of inventory that traditional retailers don’t want to deal with and that’s where we come in,” Greenberg said.

Greenberg, who was born in South Africa, founded on-line retailer DealsDirect and is currently Chairman of the National Online Retailers Association in Australia.

[Consumer Pic courtesy of Shutterstock]