The 40 Days of Returns

It’s early. The doors roll open and stop, sending a crash calling out to everyone in the distribution center that the day has begun. As the crisp morning air rushes into the shipping and receiving area, packages move at a fevered pace. A quick glance at the calendar shows it is the 21st, just a few more days until peak season is over.

But it’s not Dec. 21st; it’s Jan. 21st and your company is buried in returns and exchanges from 2008’s holiday shopping season.

For many retailers, this is an unfortunate reality. While returns are a natural part of the order lifecycle, it is oftentimes one of the most overlooked areas in the supply chain. Problems commonly occur because many retailers have not seriously evaluated their return policies and processes, or they falsely hold on to the hope that the issues will simply go away by waiting long enough.

The fact remains that a poorly executed returns program is difficult to manage, leading to increased call center costs, labor and real estate planning problems and inventory management issues. All of which creates a customer service nightmare.

Yet, as the peak returns season winds down, you have a unique window of opportunity to learn from and address these issues before the next holiday shopping season.

In today’s difficult economic environment, customers choose carefully where to spend their discretionary dollars. The most successful retailers are not only presenting their merchandise in a manner that will entice customers to buy, but are also focused on delivering a premium customer experience from start to finish. How a merchant chooses to manage that customer after the sale can have long-term effects on its business.

Customers return merchandise because one or more aspects of the order experience did not meet their expectations. A retailer’s failure to manage this critical area of the shopping experience may result in the customer’s decision to not purchase from it again. In short, returns are not just boxes, they are customers.

Implementing a comprehensive returns program begins with a retailer “listening” to their returns, asking questions that will allow them to gain a better understanding of their customers shopping experience. Retailers should begin this evaluation process by asking the following questions.

--Did the customer truly love the merchandise upon receipt?
--Was the product accurately described and did it meet the customer’s expectation?
--Did the product arrive within the expected delivery window?
--If the order experience did not meet the customer’s expectations, how difficult was it for the customer to make a return?

By conducting a thorough discovery process around its return policies and procedures, a retailer can develop a framework that will assist it in the implementation of a comprehensive program designed to dramatically improve business operations and the customer shopping experience while reducing costs, improving profit margins and increasing revenues.

Once the decision to make a change to the returns process has been made, there are three keys to success:

--A clearly stated and easy to understand returns policy
--A controlled method for collecting data
--A no hassle-returns process

The policy

One of the most critical components of a customer-friendly returns process is to make sure that the merchandise return policy is clearly stated on the company’s website or in its catalog. What’s more, the return policy and procedures need to be clearly stated on the order summary that accompanies the package upon delivery.

Studies have shown that potential customers will not make a purchase from a direct merchant if the return policy is not easy. By not having the ability to secure that first-time purchase, it is impossible for the retailer to convert a buyer to a long-term customer, and it is the repeat buyer that creates tremendous value for the retailer and its shareholders.

The data collection

A common problem retailers face in the returns process is the collection of data associated with the return. To better understand why a product was returned, most retailers designate an area on the order summary where a customer tells why they are returning the merchandise. Of course this can provide the retailer with valuable information that allows them to make critical business decisions if it is properly utilized. This information enables retailers to make modifications to their business such as:

--Change the merchandise mix
--Offer more cost effective delivery options to the customer
--Identify defective merchandise in the supply chain so it can address those issues with vendors
--Improve internal processes aimed at reducing and/or eliminating costs.

But retailers often provide their customers with too many options, causing the customer to not provide data. Or they collect data that is so widely dispersed in the post-return analysis that it is difficult to extract meaningful information. Consolidating the number of return reason codes to a more concise set of options allows the retailer to gather data from their customers and translate it into more meaningful information. And because there are fewer options that a returns manager has to examine upon receipt of the merchandise, productivity improvements can result in lower labor costs and increased throughput.

The returns process

Many retailers resist providing their customers with a prepaid return label out of fear that it will cause their return rates to increase. But providing the customer with a prepaid USPS-based shipping label helps reduce customer frustrations with the return process and improve satisfaction.

Customers no longer have to stand in line at a shipping location and incur out-of-pocket expenses tied to the shipment. Instead, the cost of the return shipping is deducted from the credit issued as a part of the return. If the retailer chooses to charge a small premium for the use of the service, it provides them with an additional opportunity for incremental income.

At the same time, return-related call center costs can be reduced from 15% to 25% through the use of an integrated prepaid label with clearly stated instructions. The impact of an effectively implemented returns management process can have an ROI that is measurable in days or weeks, versus months or years.

The multichannel retail industry is weathering the toughest economic environment in more than a generation. As online holiday sales decreased by 3% from the previous year, the first time ever for such a change, retailers are looking for every opportunity to lower costs, improve operations, and build programs that will help them to differentiate themselves from other retailers in the marketplace.

An effectively deployed intelligent returns management (IRM) system, or process, offers retailers one of the easiest ways to reduce costs, improve customer service, and increase profitability. Hopefully, we will all listen to what returns are telling us.

Kevin Brown is director of marketing for Newgistics, a provider of small parcel shipping and mail processing solutions for the retail, mobile devices, electronics, medical devices and asset recovery industries.