Chain Store Age: Multichannel Retailers Streamline Returns Operations
By Deena M. Amato-McCoy
Through special arrangement, what follows is an excerpt of a current article from Chain Store Age magazine, presented here for discussion.
JupiterResearch projects online sales will reach $95 billion this year meaning many retailers, big and small, will come out feeling pretty good about top line performance for 2006.
Which companies come out winners and losers in the online arena can often be directly tied to customer service. Often, discussions of online customer service focus on how easy it is to navigate a site and speed of fulfillment. Increasingly, however, consumers view return policies as an integral piece of the customer service equation.
Jonathan Dampier, VP marketing and corporate strategy, Newgistics, told Chain Store Age, “Holiday shoppers are clearly concerned with returns programs.”
“In fact, many consumers decide where to shop based on a retailer’s return policy,” he added. “If they know it is inconvenient, it is unlikely they will make a repeat visit.”
Road Runner Sports is among the many that have upgraded returns program to satisfy shoppers.
“Our vision into returns was limited. We had no way to track incoming merchandise,” said Jennifer Melzer, director of operations, customer care, for Road Runner Sports.
When consumers needed to make returns, Road Runner was flexible, allowing product to be shipped back through carriers including FedEx, DHL and UPS. Because each of the shipping companies used their own proprietary tracking systems, Road Runner customer-service representatives weren’t always clear if returned product had actually made it back to the retailer.
“Shoppers would call expecting answers about merchandise credits, and we didn’t know if the return actually arrived or if it was sitting in the trunk of their car,” said Ms. Melzer.
This bad situation only got worse once the holiday shopping season rolled around. Fourth quarter sales would go up and returns would start to hit in the first quarter. Problems related to handling returns meant trouble for the long-term prospects of Road Runner’s online business and the company began its revamp.
“Our only criteria was that we wanted a solution that would support an easy, convenient and low-cost returns program for our shoppers,” said Ms. Meltzer.
Road Runner Sports chose Newgistics’ Smart Label program to simplify the return process.
The retailer’s customers receive a pre-paid return label complete with Road Runner’s return address, a barcode and the prepaid indicia with each shipment. To make a return, customers repack the merchandise, affix the sticker to the outside the package and drop it in the mail.
Packages are routed to a dedicated Newgistics’ consolidation point where it is scanned routing data is relayed to Road Runner’s ERP (Enterprise Resource Planning) system.
Merchandise is moved onto trucks and sent back to Road Runner where the barcode on the package label is scanned.
The ERP system compares the package data to the original invoice and authorizes the return. Customers are then credited for the return minus a $8.99 Smart Label fee.
Ms. Melzer said, to her surprise, returns actually decreased after the company instituted the new program.
“It helped us to improve our service and lower our return rates,” she said. “It used to take up to three weeks to credit customers. We have cut that time in half. Further, we handle a 48-hour credit turnaround upon receiving the merchandise.”
Another benefit of Road Runner’s return program is it has helped decrease volume to the company’s call centers by 30 percent. Roughly 70 percent of Road Runner’s online shoppers use Smart Label.
There are other benefits associated with the use of the program, according to Ms. Melzer.
“One major advantage is that Smart Label informs us of incoming freight. This helps us to staff more appropriately and cross-train our employees in the DC, especially when handling post-holiday returns,” she said. “This helps us significantly save labor costs. Before, we had no idea of what would hit our dock and how many people we needed to help.”
Discussion Questions: How important are product return policies and procedures to the average online consumer’s perception of a retailer’s customer service?
What systems (retailers and/or technology provider) do you believe does the best job of handling online returns?
After struggling with multi-channel retailing returns issues for many years, I was an early adopter of Newgistics three years ago. This company gets it. They were the first and still the leader in understanding both the needs of the consumer and the retailer and the need to deliver near-flawless execution.
My experience mirrors that of Road Runner. The majority of our customers are delighted with the convenience of slapping a pre-paid label on the package and handing it off to the postman. At the first scan in the combined USPS/Newgistics consolidation stream, our customer service team gains the ability to do online inbound tracking which is a huge advantage for both parties.
As soon as the return is processed, a confirmation email is sent out to the customer with the added offer of free shipping for exchanges. Customers love it and the numbers prove it.
Our research over the last several decades shows that hassle-free returns continues to be one of the eight core consumer expectations in retail. It is amazing, in a way, that these expectations have not changed during all the technological innovation. Possible lesson: in retail, technology has not changed consumers so far, and is unlikely to in the future. This is something worth considering.
Our data also shows that systems similar to Road Runner’s get the highest marks from customers: the customer gets a pre-paid return shipping label with every order, so all they have to do is re-box the items, stick on the label, and drop the box at the pickup point (or have it picked up). Lands’ End and LL Bean have done this for some time, and the Performance Bike channels (Performance Bike, Bike Nashbar, Super Go) are now doing this. There quite a few others as well, and the list is growing.
An interesting topic not really focused on here is what online retailers can do to PREVENT returns in the first place. Eighty-three percent of all returns fall into the same four categories; our data suggests that more than a third of these returns can be prevented, and have been prevented under controlled experimentation. Our data shows that Road Runner can do even more to prevent the returns it has; LL Bean and Lands’ End have already been working on this.
J.C.Penney ships everything with an automated return label and returns packing slip enclosed. They accept online and mail order returns at their stores as well as UPS, USPS, Fedex. The return packing slip asks the customer to identify the reason for the return (size, color, fit, etc.) They’ve done these things for at least 25 years.
I remember going to one of the early Internet retailing conferences about 10 years ago and there were 5 or 6 return logistics companies offering their services. They each had a similar pitch — concentrate on merchandising and outsource the returns process to them. Many of these same companies were exhibiting at this year’s NRF show, telling me that their services continue to be used by online and multi-channel retailers. By all accounts, these companies, including Genco, Unyson and other third party logistics providers, are doing a great job handling the returns of online and multi-channel retailers. They have the facilities to receive and process the returned product, they have the technology systems in place to administer the returns and they have the expertise to do it all more efficiently than all but the largest retailers.
Ease of returns is a universal retailing issue regardless of the retailer form (Bricks vs. Clicks). Making the initial sale is only the beginning of the relationship. Unfortunately, too many retailers of all types look at the sale as the end of the customer interaction. The post-purchase activities are key to generating repeat customers. In fact, if the post-purchase assessment of product performance, ease of returns, etc. is positive, then the customer is more likely to skip or minimize pre-purchase activities (search, feedback from family and friends, etc.) and buy from the same retailer.
My advice is not to look at returns as a problem but rather an opportunity to forge/strengthen a potentially positive long-term relationship.
Catalogue retailers learned a long time ago that it is imperative to have an easy return policy. On the Internet, consumers are shopping by picture. For apparel, the fit and/or color might not work. Time starved consumers shop on line for out of town gifts. If the recipient does not like the gift or it is a duplicate, they should be able to return the merchandise. An efficient return policy is an indication to consumers that the retailer is really in business, not just a quick-buck operation. Yes, return polices can be and are abused, but without one, online sales will suffer. This is like free shipping, which I predicted would be required for online sales to be successful. The objective is to reduce or eliminate the negatives to maximize sales.
Thanks to Google et al, bad (and good) news travels fast so it is likely that multichannel hassle free shopping will soon become as much an expectation as any other fundamental retail brand attribute. Since, shoppers will increasingly rely on customer reviews to make their choices, retailers need to be more proactive and find and fix service glitches and shopping hassles. Think web 2.0 and accept that your multichannel shopping processes are still in their beta phase – make learning a priority.
One of the best ways to uncover oh-my-God moments is to be your own customer – for the really brave – task your executives to buy on-line and then try a return. (Of course, this may produce another oh-my-God moment…) These empathy exercises will help cut down the internal sales job needed to invest in understanding and improving the multichannel experience.
Clustering customers according to their contribution to the bottom line will also help justify the effort to make improvements. If your company believes that hassles free multichannel shopping leads to profit, then start learning – do your own mystery shopping.
Also, what really matters is not the average transaction – it is how you handle the exceptions – the moments of truth.
Finally, this article should give hope to retailers since it suggests that delivering on basics can give you an edge on your competition. Professor George is correct, this is an opportunity.
What systems (retailers and/or technology provider) do you believe does the best job of handling online returns?
I agree with Ron – the process is well understood by tech providers, I would only add that the systems to track and learn how to anticipate returns may best be served by a something like a Wiki.
Time to learn, look, ask and try.