Automating Returns

Loss and fraud prevention, better customer service and optimized inventory management drive the use of new returns management modules, used to move previously-shipped goods from customers back to retailers due to repair, service, credit or order error issues.

Catalog and online retailers are especially active in automated returns management strategies that help recoup assets and enhance service as more consumers shop by Web but return to local stores.

"Returns largely have been a manual procedure in the retail environment, where, frankly, the process has not been handled very efficiently," says John Davidson, managing vice president and research director, Gartner Industry Advisory Services, Retail. "While many retailers are good at modeling outgoing orders, most are not as proficient with the reverse process, where current POS technology - primarily modules built into the front end system - can augment asset recovery, customer service and operational efficiencies."

"Today's e-retailers in particular need a streamlined returns management process to handle returns at the store level, while the blur of retail segmentation, such as food into non-food, and other cross-channel merchandising efforts that complicate the returns process are driving increased demand for an automated retail returns procedure," states Davison.

In a third-quarter 2006 retail survey conducted by Gartner, only 23 percent of retailers said they had fully coordinated return process planning across all sales channels.

Increased Awareness of the Need
In apparel, returns are lower at retail where customers can assure the footwear or clothing item fits, but much higher - up to 40 percent, according to Davidson - when purchased via catalog or online, where the customer returns process is a major obstacle to trying a fit product.

In response, "the primary trend I see among apparel retailers is an awareness and admission of the need for automated procedures that create a returns environment that is totally seamless to consumers - meaning that no matter where shoppers buy a fit product, they can return it as painlessly as possible," notes Magnus Gustafsson, vice president of direct marketing for Aerosoles, a leading brand of footwear sold in 125 Aerosoles retail stores, through the Aerosoles catalog, and in thousands of department and specialty stores in the U.S. and Canada.

Using a system from Newgistics, embedded in an internal fulfillment system that runs off an AS400, every outbound Aerosoles package includes a prepaid, pre-addressed SmartLabel with dynamic bar code of relevant customer information captured at POS. The consumer attaches the label to the returns package, which may be dropped anywhere that the U.S. postal service picks up (home, office, mail carrier, post office). The USPS scans the bar code, then Newgistics intercepts the package at one of 21 bulk mail centers, where vital customer statistics are acquired from the SmartLabel and sent to Aerosoles.

"Once the post office scans the package, at all points in time we know its status and can be proactive with our customer care functions," Gustafsson reports. "We have insight into the reverse chain earlier in the process and can communicate intelligently with customers about the package."

"The biggest value of this whole procedure is that it eliminates the barriers to buying ourproducts by reducing the burden on customers of the return process.

"Our current goal is to have 95 percent of our catalog and online returns coming back through the Newgistics solution, which provides direct financial benefits, not only through an increase in first purchases, but by eliminating lost and refused packages," says Gustafsson, adding that about 73 percent of these returns now funnel through the automated returns module.

Faster Customer Service
Increased customer service is the number-one reason for incorporating a returns management module into POS at iParty, a retail and online party supplies merchant that is using a module from Epicor/CRS in its 51 retail locations. The system allows real-time access to all retail transaction details, including original purchase and subsequent return history, regardless of when or in which iParty store the items were purchased or returned.

Previously, data for each sales transaction - typically with a high volume for items for each - was keyed in manually, with no way of tracking returns at the store level. In addition, iParty had no way to validate that someone was not stealing goods from one store and returning them in another, and demanding cash without a receipt.

"We now have the ease of scanning then pulling items into a return transaction without keying each item," says Maria McLeod, vice president of information systems for iParty. "We can assure that items are returned at the price at which they were purchased, without having to guess about promotional pricing."