Returns as a Service: The Next Big Retail Innovation

To keep pace with this barrage of unrelenting returns, retailers must turn to a service-based model.
To keep pace with this barrage of unrelenting returns, retailers must turn to a service-based model.

An evolution in the retail industry is happening before our eyes. Pre-Covid, most consumers returned unwanted items to the store’s service counter, which allowed the retailer to re-stock certain products in good condition. In 2020, we entered an era where customers shopped online in record numbers and returned e-commerce purchases at double the amount compared to 2019. That trend won’t change drastically this year.

To keep pace with this barrage of unrelenting returns, retailers must turn to a service-based model, or they’ll leave significant profits on the table.

Make Returns Frictionless, Consistent and Convenient

Returns are no longer a cost of doing business. To thrive in the post-Covid era, where nearly a quarter of all people are likely to make an online purchase at least once a week, retailers must take the same service-centric model they have developed for the forward-side of the purchasing equation and deliver a meaningful experience on the reverse-side in order to keep their loyal customers happy.

Here, we offer some suggestions to creatively diversify returns options, meeting customers where they are at while also guaranteeing the most profitable recovery.

Partnering Up to Enhance the Shopping and Returns Journey

Some brands have started exploring the potential of a RaaS-focused model. One of the first and most public partnerships was forged between Amazon and Kohl’s to allow Amazon customers to return items to hundreds of Kohl's locations across the U.S.

This example was an innovative start, tackling some of the cost factors associated with returns, but did  it go far enough to optimize the consumer experience? How close is the nearest Kohl’s store? Most consumers will have to travel up to 15 miles.

See also: [1822 Denim’s Perfect Fit Shrinks Returns 48%]

True service is offering consumers not only a convenient place to drop-off returns that they regularly frequent but provide AI-driven tools that assist in optimizing the return method before even leaving their residence.

In-Store Drop-offs

Moving forward, retailers might consider partnering with non-competing businesses that people visit frequently. Starbucks is a prime example, but there are many others. What about a 24-Hour Fitness or 7-Eleven or a Shell gas station? These are places people visit daily that will genuinely make returns efficient and easy for the consumer.

This type of model puts the onus on retailers and returns management companies to figure out how best to pick up those returns and send them back through the reverse supply chain, but I believe retailers can leverage creative partnerships for that, too.

Out-of-Store Lockers

Let’s think about the example of Amazon lockers located outside major grocery chains around the country — they are a brilliant, ultra-convenient service for customers to pick up packages. Now let’s think of this locker system in reverse for returns.

Retailers can partner with returns management companies to source convenient drop-off lockers outside high-traffic stores and oversee the process from issuing immediate refunds to processing to picking up the items. Upon drop-off, the customer could scan the item, which would alert the returns management company to pick it up.

[See also: Kohl’s Testing Self-Checkout and Self-Returns In Stores]

Using AI-based data, the scanner could also tell the company where to route the item to reduce shipping time and guarantee the highest return on the resale of that item.

AI-Driven Return Logic

In many cases the cost of returning an item back through the retail and supply chains can be upward of 30-40% of the purchase cost. One aspect of RaaS will be to use AI-driven logic via a consumer portal to make the best price decision at the earliest decision point.

Many companies like Wayfair, Walmart and Amazon are using similar tools in their e-commerce business to avoid unnecessary expenses. As these tools become more sophisticated, they will allow a customer to initiate a return and offer the end consumer options that result in the best customer satisfaction and best cost option.

Delivering Value to Retailers

Allowing customers to return items conveniently will guarantee a loyal following, but how will it make returns less costly for retailers? In short, leveraging partnerships means retailers will not have to devote as many resources to warehouse space and labor. They will not have to bring items back to returns centers, or consolidation centers, and they’ll never have to ship items twice, which further congest their supply chains.

In fact, retailers don’t have to do anything if they leverage third-party returns management companies that utilize their own technology and supply chain management to process returns.

Chuck Johnston is chief strategy officer at goTRG.

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