Retail Returns Opportunity or Curse?
In the world of fashion apparel, footwear, electronics, department stores and general retail, ‘returns’ have long been a bad word. They are the curse of the sale. Nobody wants to hear about it. Once you have sold it, you want it to stay that way. Why would you want it to come back? However, like it or not, returns happen. But how you deal with and treat them, can make a world of difference. In fact the big question is how to make it a retail returns opportunity, rather than a curse. After thinking about this differently, the next question is whether you have an order management system which is up to snuff to turn the tables to be able to make it a retail returns opportunity
Challenges With Retail Returns
The National Retail Federation 2015 Consumer Returns in the Retail Industry report pegged retail returns in the U.S. at $260.5 Billion. This is 8.00% of the total retail sales in the US at $3.256 Trillion. An IHL study commissioned by OrderDynamics estimated that worldwide retail returns to be a $642.6 Billion challenge.
NRF’s report also highlights that although 90% of consumers have receipts for their merchandise, retailers need to be prepared to contend with 10% of customers who will not have receipts with them. Being prepared for receipt-free returns, both speeds up your customer processing and provides an added service bonus for them that they don’t have to track the receipts. In fact, actively promoting that you don’t need a receipt for a return, might be a nice differentiator, that is seldom highlighted in retail, today. In either case, these can help improve customer satisfaction in an area that is frequently considered with disdain. Yes, by consumers too.
Sadly 3.5% – 6.1% or $9.1 Billion – $15.9 Billion will be fraudulent and policy abusive returns. This includes getting refunded full price on items that were purchased on sale, items returned which did not originate with the merchant, and so on.
Clearly, retail returns is a major issue, fraught with pitfalls. These can be handled with tightening your policy and strict scrutiny of each return. However, doing this will not earn customer satisfaction points, or even encourage your customers to come back. The alternative is improving the state of our retail technology.
Can Order Management Create the Retail Returns Opportunity?
For a successful retail returns opportunity, there are several best practices we recommend, which are documented in a free OrderDynamics returns
management brief. Truly, these best practices are core to making returns a competitive advantage. In addition to adhering to best practices, as pointed out above, retail technology plays a big part in making returns a success point. The biggest part of this success is your order system. It needs to be there to support you at the store level. It needs to have the functional capabilities to provide your customer profiles, their purchase and order histories, and details. All from a centralized point of view. Your order management system can make it either a retail returns opportunity or make it a nightmare.
As a baseline your system needs to:
- Accept returns without receipts
- Deal with the return payment (including delay factors, when needed)
- Keep a customer and order system of record
- Track chronic returners
- Provide full returns reports and analytics
- Re-integrate returned goods into inventory in real time
- Give customers real-time inventory visibility – including returned items
We have established that any good order management system worth its salt includes a returns management component. Now, if yours does not have this, start looking for a replacement system that provides the right functionality. Once you have grown beyond an omni-channel retail organization of 10 or 20 stores, your business simply cannot survive without it. This is especially the case considering that around 8% of your sales will come back to you as returns.
Handling retail returns quickly, efficiently, and as painlessly as possible for your customers – is good for your business. Making the process painless for consumers means that almost all of them are likely to come back for further purchases. In fact 89% of customers who have had a positive returns experience will return to purchase from that retailer, again. Making it a retail returns opportunity also means being able to process the returns efficiently, such that your associates can get them re-inventoried, and reshelved as quickly as possible. Doing so means that another customer can find the item they wanted (the returned item in good condition). Updating the inventory system, also means that online customers will be able to see your updated stock, and order online for deliver or pickup from your store. Again, good for your business.
Returns Without Receipts
Once a customer has purchased or ordered your merchandise, your order management system should have the transactions recorded as a central system of record. It means that as long as your customer can identify themselves correctly with identification, or the bar code of their latest purchase – then you can locate their file. It also means that you can now process their return simply by accepting the item back. And confirm return payment to the customers account, credit card, or provide a cash reimbursement.
This makes it easy on your associates, and it provides a seamless easy process for your customer. A surprisingly quick and easy returns process is always a good way to get a customer to think about your retail chain again, for their next purchase. If it was that easy, it gives them a positive feeling about your business, and increase their trust in your organisation.
Dealing With the Returns Payment
Some organisation may want to process the returns through a centralized hub. When doing so, the retailer may want to provide a delayed payment, to confirm the product was in fact purchased from them, and was returned in good condition. Again, a good order management system will provide delayed returns payment as an option.
Order & Customer System of Record
Identified above, the crux of turning returns into a retail returns opportunity, is to keep good records of your orders and customers. Every order management system should be the central system of record for all your retail transactions. This makes it easy to speak with your customers about returns, whether it is in-store, from the call centre, or online via email. The system of record makes the experience easier for the customer, and gives you visibility to whether this customer is a loyal consumer, or a serial returner. It gives retailers the option to adjust the conversation.
Track Chronic Returners
With a centralized system of record, you can easily identify good clients versus the chronic returner. Although they are all your customers, and you want to treat them equally well, the conversations may shift based on this knowledge. A call center agent may want to remind a chronic returner about the exact size of shoe that fit them well on their last order, where three other pair sizes were returned. This simple step alone can reduce the impact of many such customers.
On the other hand, a loyal high-value spender with few historic returns may warrant receiving a special discount offer on an item, after processing their return. In fact, this information may spur turning a return into another high-value sale. This is a great example of turning a simple return into a retail return opportunity.
Full Returns Reports & Analytics
Various reports and analytics are important to helping improve the returns aspect of your business. Standard returns oriented reports you may want to track, include:
- Returns by Store Associate
- Overall Value of Returns
- Abuse Tracking (Frequency & Value)
- Manager Overrides
- High Value Returns
- Product & Category Monitoring
As an example the product and category report can guide your future demand plans. Interestingly, Gartner highlights that 50% of returns come from 10% of the merchandise assortment. By tracking returns by product and category, you would be able to assess whether high return rates on a particular sku or product line warrants continuing to stock that item. For the next replenishment cycle, it might make sense to avoid a particular sku, product or category – to monitor the impact on returns and your margins.
Re-Integrating Returns Into Inventory
As noted earlier, the faster you can re-integrate returned merchandise which is in good condition into your inventory – the more opportunity you have to resell it at full value. Gartner highlighted that only 48% of returns are resold at full value. By speeding up the process, the odds of full value resales, are in your favor.
Processing returned merchandise at the distribution center is an easy case. Good merchandise can be restocked, and re-inventoried while waiting to fulfill the next order, or shipped to the next store location.
Processing returned items in-store means having the opportunity to re-inventory immediately using the order management system. And to re-shelf the item immediately as well. This means another prospective customer can see the item on display, increasing the chance of selling it again, at full value.
Real-Time Inventory Visibility
Fast re-integration of returned items into inventory goes hand-in-hand with providing customers and associates with real-time visibility to your inventory. The faster a returned item is re-inventoried, and shown to be available, the faster it can be chosen for purchase either online or in-store. With the order management system taking stock of returned items, it can process it almost instantly – to display to the next client. This is key to turning a curse into the retail returns opportunity!
Retail Technology is NOT All Alike
Most simple order management systems will not have this crucial functionality. Simple systems are often sold with a point of sales solution, or as a software suite module in a larger ERP (enterprise resource planning). These are great starter systems. They give you some basic functionality of single rule routing, system of record functions, and so on. However, they are seldom functionally robust, and seldom include the critical element of returns capabilities, you will need.
If your system is a simple system like that described above, consider an upgrade. The full retail fulfillment cycle includes getting products to customers effectively, and making products coming back a retail returns opportunity. Don’t be short changed by your existing technology.
Turning a Curse into a Retail Returns Opportunity
Turning returns from a curse into a retail returns opportunity takes some effort to create. The right procedures and atmosphere is essential to keep customers happy. It also takes having the right retail technology in place to support your associates, to process returns quickly, efficiently, and effectively.
Despite the dauntingly large volumes of returns that come back every year and season, there is a silver lining. Returns hit all retailers. Eight percent of physical retail sales will come back as returns. Online sales can easily hit 30% returns or even higher. This one area where you can make a positive difference to your business, by providing a premium returns experience for each of your customers. Done well, it will encourage customers to come back to buy from your chain, over and over again. With the right processes and supporting order management technology, you can stand out above the rest.
Let your competitors experience returns as a curse. Meanwhile, turn yours into a retail returns opportunity!
Charles Dimov is Director of Marketing at OrderDynamics. Charles has 21+ years experience in Marketing, Sales and Management across various IT and Technology businesses. Previous roles include Chief of Staff, Director Product Marketing, and Director Sales. Charles has held roles in brand name firms like IBM, Ericsson, HP, ADP, and OrderDynamic.