In the apparel industry, where return rates can run as high as 30%, it makes sense for catalogers to simplify the returns process. And many apparel catalogers have increasingly been making returns easier for customers by using prepaid labels.

Chicago-based women’s apparel cataloger Barrie Pace offers a prepaid U.S. Postal Service return label for both returns and exchanges. “We find that offering the prepaid label is easiest for our customer,” says director of marketing Gina Valentino. The cataloger pays the cost of the return postage for exchanges of the same item in a different size or color, but it charges the customer $6.50 for shipping if she wants to exchange for another item or return the item altogether.

Because the prepaid label is bar-coded, the USPS can process the package more quickly, thus getting it to Barrie Pace faster. And the quicker the return comes back, “the faster we can get the merchandise back into our inventory to sell again,” Valentino says. “Suppose you have 100 orders, and your return rate is 20% – that’s 20 blouses waiting to be returned” – a significant amount of merchandise that you might have already reordered because the returns were delayed.

L.L. Bean women’s apparel spin-off Freeport Studio includes a U.S. Priority Mail postage-paid return label with all its packages. The customer can fill out the return portion of the packing slip, reseal the package, affix the label, and drop the merchandise at a post office, says spokeswoman Jolene McGowan. The Freeport, ME-based cataloger also includes a standard address label so that the customer has the option of returning goods via another carrier at her expense.

McGowan says it’s important to make returns easy because “Freeport’s `Monday through Friday’ fashions tend to be more fitted than weekend casual wear, so our customer may need to try out our sizing once before knowing the exact fit.” For exchanges, the cataloger picks up the return postage; for returns, it bills the customer’s credit card $4.95 – the same amount L.L. Bean pays for the service.

No more call tags

For years, Downer’s Grove, IL-based general merchant Spiegel had been using United Parcel Service’s call tag service, in which the customer would phone a number included with the package to arrange a pickup. But Spiegel stopped using call tags this past May, says Judy Hirsch, Spiegel’s divisional vice president of trend forecasting. “It just caused more confusion because people were not home and UPS would have to go back to pick up the merchandise two or three times.”

Spiegel now offers prepaid postage labels that a customer can use to return products via USPS or a UPS drop. When the customer uses a prepaid label, the amount – either $4 or $6.50, depending on the weight of the package – is deducted from the customer’s refund check or charged to his or her credit card. Spiegel pays the postage only if it made an error.

Most catalogers either don’t know or underestimate the cost of a return, says operations consultant Curt Barry.

Suppose it costs 50 cents per order to mail the catalog, and $1.50 to take a phone order. Add $1 for credit authorization, plus $4 to pick, pack, and ship the item.

That means you’ve already spent about $7 to take, process, and fulfill the order. Now take into account the lost margin. If you’ve sold an item for $35 with a 50% margin, you’ve lost $17.50 of margin if that item is returned and not resold. Add to the lost margin the $7, and the cost of the return is $24.50.