Strategies to Convert Returns Management From a Drain to a Profit Center

April 27, 2010 By Joe Keenan

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Product returns are a part of every merchant's operations, whether you sell online, retail, catalog, B-to-B, apparel, consumer electronics, etc. In fact, according to a recent survey, returns cost retailers $53 billion last year alone. But what's often viewed as a drain on profits and employees’ time can also be an opportunity to attract and retain customers when the process is handled right.

At last week's National Conference on Operations & Fulfillment in Orlando, Fla., Rob Martinez, CEO of Shipware Systems Corp., a distribution solutions and strategies consulting firm for volume parcel shippers, led a session to help retailers identify best practices in returns management.

Impact on Customer Experience
Consider the following statistics from a recent survey conducted by Shipware Systems highlighting the value consumers place on a retailer's returns policy:

• 85 percent of consumers said they'll not shop with a retailer again if its return process isn't convenient; and
• 95 percent said they'll shop again with a retailer if its return process is convenient.

Depending on the channels you sell in and the products you offer, the percentage of your sales that are returned can vary greatly. Online and catalog retailers, for example, generally see much higher return rates than retail stores. This makes sense for a couple of reasons, Martinez said. Products sold online and in catalogs are unseen (consumers are unable to touch them); there's greater opportunity for buyer's remorse as the time delay waiting for products affects emotional purchases; there's greater opportunity for error with delivered products (e.g., picking, packing, out of stock); and consumers behave differently when they shop online — e.g., purchase multiples of the same item (e.g., a sweater), then return the sizes that don't fit.

As for return rates for product categories, apparel registers higher rates of return than electronics, for example. The national average for returns as a percentage of retailers’ outbound products is 5.2 percent.

Return Policy Best Practices
With product returns inevitable, retailers must shift their focus from what returns are costing them to what they can gain from the process — namely, customer loyalty. Martinez presented the following best practices to help make your returns policy a source of strength.

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