Enhancing Your Returns Process

4/29/2014
As retail sales continue to grow year-over-year, retail returns will also continue to increase at exponential levels. According to the National Retail Federation, consumers were expected to return $58.5 billion worth of holiday gifts this year, which is roughly one fourth of all goods returned during the entire year of 2013. With returns playing such a vital role in retail, it's important for retailers to re-examine returns management processes. Here are some tips to help retailers obtain long-term financial growth.

Incorporate returns into omnichannel
Many retailers are adjusting their supply chains to deliver on consumers' growing omnichannel expectations. For consumers, convenience is the key. According to the 2013 UPS Pulse of the Online Shopper Study, returns are on the rise with 62 percent of consumers stating they returned an item bought online in 2013 – compared to 51 percent in 2012. The study confirmed an online shopping trend: consumers want to shop anywhere at any time. The survey discovered 62 percent of online shoppers want the ability to purchase items online and make returns in store, and 82 percent of consumers said they would complete a purchase if they could return an item to a store or have free return shipping.

For retailers it's all about rapid deployment of returned merchandise and optimizing revenue to fulfill online demand. For example, when an item is returned to a store, rather than sending it to a clearance rack or a distribution center for re-circulation into current inventory, retailers should consider listing the item online as open stock. By incorporating this ship-from-store strategy, retailers are lowering their warehousing and consolidation costs while minimizing markdowns.

Focus on return yield
Retailers can look to the high-tech industry as an example of how to handle and redeploy returned goods back into the marketplace. Each year, the high-tech industry spends more than $14 billion on returns – according to a UPS-sponsored white paper by Greve-Davis. When dealing with high-value goods such as electronics – including laptops, tablets, cell phones and accessories – manufacturers without an efficient reverse logistics strategy incorporated into their supply chain operations could lose more than 50 percent of the value of the returned item.

This lost opportunity could add up to millions of dollars for larger retailers. While the cost of processing returns is less than 4 percent of total logistics costs, high-tech companies can average a recovery value of 28 percent on returned assets and a 12 percent competitive advantage in overall customer satisfaction with best-in-class reverse logistics.

Assess your third-party partners from a returns perspective
Your returns experience can only be as good as your returns partners. Third-party logistics providers (3PLs) should have these options:
  • Access to multiple modes of transportation
  • A global network including warehousing and distribution locations in all key markets
  • Contract logistics services
  • Specialized returns offerings such as print and electronic returns labels, options such as picking up a return item while delivering a replacement and other services that make returns easier for the end consumer
  • The ability to assess your current returns process and make actionable recommendations for optimizing your returns to deliver efficiencies for your company and a better experience for your customers
  • UPS can provide a returns processing center – send the return directly to UPS and we can make sure the item gets to the desired destination quickly and efficiently, which saves retailers time and money.
Final thoughts
As retail returns continue to grow, it's important for retailers to re-evaluate their returns management process on an ongoing basis. Consumers who buy online often return all or some of the items, and when they do, they want a hassle-free returns process. Free shipping, preprinted labels, instant returns credits and the ability to return to stores have become standard for retailers. The next frontier in retail returns will focus on optimal rapid redeployment of merchandise once the retailer has it back from their consumers, minimizing inventory aging and optimizing the overall yield of that returned merchandise.


Carrie Parris is director of corporate strategy for UPS.
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