‘Unreturn’ – How Retailers Can Transform 'Return' Into An Opportunity
A few months back I purchased a GPS from the online channel of a brick and mortar store. The web site was friendly, the deal wonderful, it even offered me a free rush shipping. I got regular updates on the status of my order every few hours, and within 2 days, the GPS was on my door steps. An awesome shopping experience.
However, I had a completely different experience when I decided to return the GPS. First of all I could not return the item online. There was also no provision for me to return the item to their store as it was bought online. I had to call their care center who advised me to ship it to their warehouse. I followed their instructions but had no clue where my returned item was and when I would get my credit back. Finally, after several days and many calls to the care centers and an equal number of unpleasant conversations I got my money back.
Retailers have consumer friendly sales channels, stores, online and catalogs but cumbersome returns processes. A robust returns and reverse logistics process can be of enormous benefit to the retailers. It will provide higher customer satisfaction and loyalty, improved in-transit tracking, reduced shrinkage and damage leading to higher sales and lower costs.
Building a robust returns and reverse logistics process is easier said than done. It is extremely complex, time consuming and expensive to modify existing processes. It involves creating a single item master database across the company, having common pool of inventory across various channels like stores, online and catalog, streamlining the reverse logistics process and integrating the returns applications with the back end order management and merchandising systems.
I look at it as primarily consisting of 2 components. The first one is focused on improving the customer touch points. This includes improving the customer experience at stores and online where the customer initiates the return, enabling cross channel returns, improving the process of giving credit back to the customer and enabling the customer to get the status of their credit/return. The second component is focused on improving the back end processes. This includes streamlining reverse logistics, ensuring that the inventory is returned to the appropriate channel, improving returns analytics to help in better assortment planning.
While the entire benefit to a retailer will come from implementing both the components, I believe that the first component of improving the customer touch points has a bigger impact on the customer perception and loyalty. As illustrated by my experience, it impacts the customers willingness to return to a retailer in the future. This is also relatively easier and quicker to implement for a retailer. So instead of addressing both the component at the same time, I strongly feel that retailers should improve the customer touch points for return as a first step. This will ensure customer loyalty and consequently improved sales immediately. The more complex and time consuming second part of back end integration can be taken up in a subsequent phase.
Recently, Oxford University announced ‘unfriend’ as the word of the year. This word means ‘to remove someone (who is most likely perceived as an unwanted acquaintance) as a friend on a social networking sites like Facebook'. Retailers can also ‘unreturn’ the unwanted and perceived annoying part of their business and can reap benefits out of it. This can be a key differentiator for the retailer, resulting in greater customer loyalty and higher sales in the long run.
Comments
For a “Buy anywhere and Return anywhere” world, while I agree with the author to improve the customer touch points, at the same time I would like to weigh the capability of the retailer for an effective reverse logistics process.
In a very generic thought, “Return” can be considered as a “Revenue Loss”. Returns reduce the profitability of retailers by 4.3 percent (as per Reverse Logistics Magazine http://www.rlmagazine.com/edition01p12.php).
Retailers should strategize how to reap the “cash out of the trash” in an effective manner.
When you are in a multichannel world and you buy the product online and return it at store, retailer should plan how this item can be re-sold on the shelf instead of sending to warehouse or vendor. How quickly stores move the items to centralized return locations (warehouse) for repackaging, selling to broker or pushing them to outlets matters a lot.
There is a good co-relation between customer retention and managing returns and can be clearly realized when the customer return increases to a considerable amount. If retailers don’t plan for an efficient reverse logistics process in time, they will fill their warehouse with junks and will not able to reap any benefit out of it.
Posted by: Jagannath | January 22, 2010 2:35 PM
I dont agree with jagannath. The idea that returns are a revenue loss is one way of looking at it. A better way is to regard this as an additional face-to-face encounter with the customer.
Now that the customer is already at your store, you can use this opportunity to sell thru same-day expiry coupons. You can also use this opportunity for feedback on why the product didnt work in the place. Is it indicative of defect, was it bad marketing or is it a different segment that should be targeted.
Regard every challenge as an opportunity, not as a setback.
Posted by: Azi | February 3, 2010 11:17 PM
I liked the article. Have couple of questions. Did you pay for the return freight? If yes, do you think its justified to ask the customer to pay for it? What about a tie-up with a carrier who can come and collect the item, you intend to return & charge you for the return freight?
Posted by: Sandeep Ghosh | February 4, 2010 5:00 PM