Get Returns On Your Returns

Get Returns On Your Returns

April 19, 2016

As originally published on ROI – Total Retail – The Retailer’s Resource for Content & Community

With the advent of omni-channel retailing, the subject of customer returns has become a hot topic for retailers. The financial impact of returns has always been a factor for traditional retailers, but the evolution of customer-centric omni-channel retailing has pushed this issue to the forefront. In fact, we’ve seen some very pointed discussions in the media the past couple months. Consider the following:

This article in Bloomberg Business shows how retailers are using new analytics to significantly cut their return rates.
An eye-opener in Fortune took a by-the-numbers look at the marked increase in fraudulent returns.
NBC News noted retailers’ increasing concern with shopper “wardrobing” and serial returns.
Gartner published research for supply-chain heads showing how improved returns management could positively impact profits in multichannel retail businesses.

When you consider that apparel retailers typically see return rates of 20 percent to 40 percent, it’s clear this is a huge financial issue. Sales, gross margin and cash flow are all strongly affected. If you looked at overall returns as one of your “suppliers,” you’d likely conclude that returns comprise the largest single supplier to your business! It follows that returns are deserving of considerable attention.

Omni-channel retailing — where purchases originate in any channel and are fulfilled from multiple locations — adds importance and complexity for all retailers. I’ve been saying for some time that the omni-channel systems and processes of the future will reflect the best planning strategies of brick-and-mortar retailers and direct (i.e., internet and catalog) retailers. As brick-and-mortar retailers address the growing challenge of omni-channel returns, they’d be wise to follow the path laid down by those already involved in direct retailing.

Here’s why: Direct retailers have a leg up on their store counterparts. Operationally, it’s always been critical for these omni-channel retailers to have rapid returns handling processes in place. That way, they can receive, process and re-inventory first-quality returns, and quickly make them available for selling in the relevant channel.

Likewise, merchandisers and inventory planners of direct retailers are also miles ahead on this. Because they have access to customer transactional data across several channels, they’re able to determine when and why returns occurred, and can then incorporate that data into their merchandise profit analytics and forecasts. The same holds true for inventory planners, who can incorporate inventory trends into their future inventory projections.

Therefore, brick-and-mortar retailers, when dealing with the challenges of omni-channel returns, look to your direct retail counterparts for insight on gaining control of this critical area of your business.