by Eran Rozenfeld
A higher percentage of sales are starting to result in returns. Many people order items with no intention of keeping them. Sometimes it’s a matter of short-term usage, such as buying a new suit for an event, and returning it the next morning. Other times, it’s just part of a selection process while purchasing clothing online, such as ordering several different items in various styles, colors and sizes, keeping only the best pieces while returning the rest.
Returning items has become so commonplace that websites like Liquidation.com and Direct Liquidation have created an entire business that actively markets and sells returned merchandise. The rise in returns is problematic for retailers for several reasons: there are the additional costs of handling returns, there is also the increasing risk that if the process is unclear and breaks, there will be increased churn due to customer frustration. More consumers are measuring their satisfaction with a brand based on the ease and simplicity of the returns process.
The High Cost of Returns
Moving a product backwards up the logistics chain, referred to as reverse logistics, is a complex, time-consuming process that is also very expensive. According to the National Retail Federation, in 2017, the cost of returns was estimated at a staggering $22.8 billion for the U.S. retail industry alone.
Each and every return means additional man hours to adjust revenues, manage associated accounts, coordinate with carriers, and restock inventories and warehouses. Inevitably, items can be damaged while in transit, requiring repairs, while some items need to be trashed because they can’t be salvaged. When online purchases are returned to stores, owners are saddled with merchandise that might be out of season, or may be a “one off” compared with their existing merchandise, making these items more difficult to resell. Even if returned items are sold to a third party to resell, all the transport, handling, and transaction costs add up.
Many companies focus on streamlining outgoing sales and fail to fine-tune return processes. As a result, many consumers experience confusion and frustration. The quantity of customer inquiries and complaints increase, requiring the attention of customer service agents, while risking a company’s reputation for customer service excellence.
Tracking and Streamlining Returns
Automating the return process can reduce manpower requirements and improve customer satisfaction. Integrated warehouse management or business management systems, such as ERP (Enterprise Resource Systems), can accelerate the process of providing customer credit and processing returned items. ERP systems can store, manage and share critical company and customer data to help identify purchases that qualify for full refunds. Common errors that lead to returns, such as an incorrect address, can be minimized by integrating ERP directly with shipping and logistics data to eliminate the need for duplicate data entry.
With an ERP system in place, the various levels and types of returns can be easily tracked to identify root causes for returns. Data analysis can reveal, for example, that a product is consistently too small, indicating a problem with sizing, or when an item is repeatedly returned, it may indicate that it doesn’t match the description on the website. Return data can also be analyzed to discover when stolen receipts and credit cards are used to receive refunds, or when a customer attempts to return stolen merchandise.
Returns have become an integral part of the online retail business, and need to be handled as quickly and as diligently as the purchase itself. By automating the return process and integrating inventory, warehousing and customer service data via a business management system, retailers can experience increased operational efficiency, productivity, and reduced expenses. If by tracking, monitoring and improving the return process, there is one more satisfied customer, that can be the most important benefit of all.