For catalogers, returns are a fact of life. According to Richmond, VA-based operations consultancy F. Curtis Barry & Co., typical return rates range from 10%-20% for casual apparel to 15%-20% for high-tech products and as high as 25%-40% for high-fashion apparel. While you can’t eliminate returns altogether, how you handle them can make a huge difference in your customer satisfaction levels — and to your bottom line.
Getting the goods back
A returns processing service such as Austin, TX-based Newgistics’ SmartLabel can track returned merchandise for you before it makes its way back to your distribution center. Newgistics has arranged with the U.S. Postal Service to pick up packages carrying a Newgistics barcoded label from the USPS’s 21 bulk mail centers (BMCs). Newgistics then takes the packages to one of its five processing centers. After scanning the labels, Newgistics sorts and aggregates the packages and sends reports to the catalogers regarding the number of packages and when to expect them back at the distribution center, explains Jonathan Dampier, Newgistics’ vice president of marketing.
Pricing for the service is based on the volume and weight of the returned packages Newgistics processes. Dampier says the service processes an average of 300,000 returned packages per cataloger client at an average charge of $4.95 per package. Catalogers in turn typically charge customers who elect to use SmartLabel a flat rate of $5.50 or so. “Our clients typically see in the first 90 days [of offering SmartLabel] a 70% usage rate.”
Another option is to invest in returns logistics software, such as Multi Modal Returns Management from Atlanta-based supply logistics company Manhattan Associates. Costing between $25,000-$40,000 in licensing and an additional $20,000 in implementation fees, the software allows companies to print out on the bottom of their shipping invoice a prepaid returns label.
The software is programmed to print out a barcoded return shipping label tailored for each product, says David Hommrich, senior director, reverse logistics for Manhattan Associates. All items weighing less than 50 lbs., for example, might be programmed to be shipped through United Parcel Service, while items weighing 50 lbs. or more might be labeled to ship via a home delivery service such Exel Logistics or White Glove Delivery. The software can also be programmed to route returns through specific distribution centers. For example, all jewelry returns could be keyed to be sent back to one fulfillment center, while apparel could be programmed to be sent back to another facility.
In addition, the software sends customers at least three returns shipping updates similar to the e-mail alerts a shopper receives after placing an order. The first e-mail might alert the customer that his return order has entered the company system; the second might let him know the package has arrived at the distribution center; and the third would tell him that credit has been returned to his account or that his exchange is on the way.
Processing the goods once you get them
When returns arrive at your distribution center, you may be tempted to let them sit while you concentrate on fulfilling outgoing orders. But doing so can cost you money and customers.
“Returns can have a big impact on the bottom line. It’s money sitting there,” says Patti Satterfield, business development manager of Santa Ana, CA-based operations logistics consultancy Q4 Logistics. She has seen catalogers with as much as 10% of their inventory tied up in returns or exchanges following a peak selling season. Speedy restocking of merchandise, she says, is particularly important for apparel catalogers and other marketers that sell seasonal or otherwise time-sensitive products.
Most warehouse management software systems enable you to program return labels and accompanying data to be print out along with the pick ticket for each order, Satterfield says. You can also add to the label a scannable barcode encoded with the customer’s order and contact information. Once the barcode is scanned into a computer, a page with the information appears onscreen so that the returns processing worker just needs to manually input the return or exchange information.
“It skips that manual process of looking at the customer handwriting to see what the name is,” says Satterfield, “by pulling up the order information. You have all the information right on screen so that you can address the return right at that moment.”
Not surprisingly, larger catalogers tend to use more cutting-edge returns systems. Broomfield, CO-based Corporate Express, an $4.4 billion office furniture and supplies cataloger, has a fleet of 1,400 trucks that deliver orders across the U.S. and Canada. Each driver is equipped with a handheld computer barcode scanner, which can be used to process a return on the spot from a customer on the delivery route. Each driver has a supply of unprogrammed barcode labels. If a customer gives the driver a package, the driver simply takes a return label with a generic barcode, places it on the return, and scans the customer information onto the label. The product then makes it back to one of the company’s 38 distribution centers.
“We prefer that the customer print out a returns authorization,” says Mark Newhall, Corporate Express’s vice president, customer care, “but the reality is that the customer in a hurry sees our driver and asks him to take it back.”
Technology can only take you so far. You still need enough manpower to sort and distribute the returns back into stock or, if necessary, to a spot designated for refurbishments. Sports Endeavors, a Hillsborough, NC-based soccer and lacrosse gear cataloger, usually hires two to four part-time seasonal employees in October or November to assist the 8-10 permanent, full-time returns staffers. During the peak fall season, Sports Endeavors receives as many as a few hundred returns a day.
“Our goal is to process returns in a couple of days,” says vice president of operations Blake Strayhorn. “If we get behind it takes a couple of weeks to get back on track.”
Making the most of returns
Fort Walton, FL-based cataloger/retailer Edwin Watts Golf, which boasts a return rate of less than 0.5%, processes returns almost immediately, says John Watts, director of mail order and Internet: “The guy who opens the box is the same guy who processes the credit or does the exchange. We’ve always felt that if one person can touch the order from beginning to end, you can get the returns transaction done in one day.”
The 36-year-old golf apparel and supplies marketer company is proactive in dealing with returns because it believes properly handling them contributes to the lifetime value of the customer. “I think the real issue is that for a lot of companies the returns function has a black cloud over it as a negative,” Watts says. “We view it as a positive, an opportunity to do something right and show the customer why there is an advantage in dealing with us.”
Return authorization forms that give catalogers a heads-up on merchandise that’s coming back to the distribution center can help streamline the returns process. But getting customers to complete these forms can be challenging. In fact, you may need to provide incentives for customers to fill out the forms, says David Himes, senior vice president of NewRoads, a third-party fulfillment center in Martinsville, VA.
A returns authorization form is typically a part of the packing slip that can be filled out and detached or a page on the company’s Website where the customer can enter her order information and contact information. The form will have the customer indicate why the item is being returned and how it was paid for, and if the customer wants to exchange the item for another product or receive credit for it.
To motivate customers to complete the form, try offering free shipping on the return or an extra dollar of credit. Himes suggests that catalogers promote such incentives on the Website, on the order form, and on the order invoice.