Making the Most of Retail Returns

The hideous economy is having a devastating effect on consumer confidence and spending. And what sales boost that a retailer does get during the holidays may be overshadowed by the post-holiday challenge of managing returns.

Retailers need to make the most the revenue and earnings potential from every customer transaction. Customer returns may hold the key to reducing retail revenue shortfall.

Some companies have come to realize that customer returns may hold the key to gaining incremental sales – reducing lost revenue – and have embraced the attitude of “If a customer is already here in the store and has return money in hand, waiting to be spent, why shouldn’t it be spent here?”

Retailers have a unique opportunity to reinvent the return desk by using “return optimization,” turning the point of return into a profitable sale and boosting customer loyalty in the process by creating a positive return experience and incentive to continue shopping.

There are systems to help optimize return transactions. Software can issue intelligent incentives following legitimate returns and exchanges – this can increase customer conversions while reducing fraud and abuse, resulting in incremental sales increases of more than 1%.

Here are some other tips for retailers to successfully reinvent their return counter, and at the same time boost revenue and create a positive customer experience:

–DON’T underestimate the importance of proper staff training – Make sure employees know company return policies and clearly communicate them to customers during purchases. A verbal reminder of policies, in addition to printing on each store receipt and well-placed signage, will prevent tension and misunderstanding post-holiday–when returns are at their highest.

–DO supply return customers with a reason to keep shopping – Software can facilitate significant incremental sales at the point of return and build customer loyalty by using a customer’s return information to instantly customize an incentive for that particular person, thus providing an immediate reason for the customer to continue shopping at the store. The program is an opportunity to offer a discount or special offer and recoup the initial sale.

–DON’T overreact or ignore the impact of return policies on consumers – Be aware of how the processing of returns can affect relationships with customers. Long lines and cumbersome return policies do little to assuage crowd tensions, voiding out any positive first impressions made at the initial sale. VIP customers should always be handled with care – most easily accomplished by creating a special holiday returns line.

–DO try to keep return policies lenient and flexible – Special technology like Verify-1 Return Authorization can help retailers identify a customer’s unique return behavior, tracking how frequently they return items and the dollar amounts of past returns. Since less than 2% of consumers are responsible for fraudulent or abusive return behavior, the software helps protect honest customers with more flexible return policies and reduced wait times for transactions.

–DON’T forget to study the latest trends – By keeping abreast of the latest trends in retail fraud – whether related to organized retail crime rings targeting products or chains, or simply learning more about loss prevention software tools – retailers can do their part to prevent fraudulent and abusive returns, which total about $15.5 billion annually.

And finally, you should not forget that returns are lost revenue—but more of it is recoverable than people think. Every return is a lost sale and a reduction to net sales; bad news and even worse in today’s economic climate.

Returns have long been an expected part of the retail business model, but they don’t need to be a completely negative hit to sales. By analyzing returns, not simply accepting their fate, and focusing on the concepts listed above, you can unlock the value hidden in your return transactions.

Tom Rittman is vice president of marketing for The Retail Equation (, which sells retail transaction optimization systems.