Keeping returns in check
August 3, 2015 03:59 PM
Houston-based department store chain Stage Stores Inc. operates 850 stores in small and medium-sized towns, most of which are in areas where a lot of other merchants don’t operate. “We don’t want to be where Macy’s is,” says Steven Hunter, the nearly 100-year-old retailer’s executive vice president and chief information officer. Maybe that explains why Stage didn’t dip its toes into e-commerce until 2010.
But in Stage’s case, being a latecomer to e-commerce turned into a blessing when it came to handling returns, especially during the post-holiday return crush that typically begins in January. Rather than use an online inventory system separate from its in-store inventory, as many multichannel retailers did during their initial rush to begin selling online, Stage uses an integrated inventory management system that enables it to track both its goods and returns. That’s particularly important as the retailer’s online sales grow: The retailer’s e-commerce sales, which account for 2.5% of its overall revenue, are growing 40% annually.
Having a streamlined returns process helps during the holidays, as experts say that 10-40% of holiday sales are returned, depending on the merchandise category. And returns add up: North American consumers return an estimated $246.3 billion worth of goods annually, according to a recent study conducted by research firm IHL Group that was commissioned by predictive analytics software maker OrderDynamics Corp. Retailers are turning to technology to help control the cost of returns and get goods sold again.
Returns are a fact of retailing and merchants have to be ready to deal with them. For instance, Stage’s Oracle Corp. merchandising system allows the retailer to route online returns to either a distribution center if an item is still in season and salable or, if it isn’t, to one of four clearance centers the chain maintains.
During the holiday season, Hunter sets up special arrangements with makers of traditional holiday gifts, such as heated ice scrapers and other small items that might be featured in a Black Friday display, to have those products returned directly to the manufacturers or to have them shipped back in bulk from the stores’ returned goods center in Jacksonville, Texas. Some vendors also agree to take back unsold products.
Motorcycle parts and clothing seller RevZilla Motorsports LLC takes another approach to simplifying its returns process by using software that it built in-house. “The technology controls the entire process from when that customer hits the mouse and clicks checkout to when we put a return back on the shelf,” says Patrick Roscoe, the retailer’s director of customer experience. The software enables the retailer to forecast its daily return volume based on the incoming reports it receives from carriers. Once products are returned, the software also allows for a quick classification of items as resalable if they are in new, unused condition. If products don’t meet that standard, they’re put through a secondary inspection to determine if they can be sold at discounted prices.
Rather than use manufacturers’ standard SKUs, RevZilla creates unique SKUs for each product unit in its inventory, meaning two identical helmets will have two different SKUs. “This gives us the ability to see the complete history of each specific item,” Roscoe says.
With a unique SKU for each item when a return comes in to RevZilla’s Philadelphia fulfillment center or the Las Vegas returns processing center that handles returns for its large California customer base, it’s “very easy to get items back on the virtual shelf again. We don’t have to organize where things live in our warehouse,” Roscoe says, because the e-retailer records where each product unit is.
The system enables RevZilla to get a returned item back in its salable inventory in 24 hours from the time the return is received. By providing prepaid UPS shipping/tracking labels to customers for returns, RevZilla can know what level of returns to expect on any given day and to decide whether it needs to shift staff to handle a higher volume of returns, Roscoe says.
While technology can help retailers process returns and get items quickly back into inventory, some retailers are using other tactics on the front end of the sales process to minimize the number of items that get returned. Getting the wrong size item, for example, accounts for $62.4 million in annual returns, the IHL study found.
Take online jewelry retailer Ritani, which found that a lot of consumers were returning rings because they didn’t fit their fingers. The issue was solved once it began shipping prospective customers ring sizers for free, says Brian Watkins, Ritani’s president. “It saves everyone time and effort.” Sending a sizer can cost the retailer $5-$6 compared to the $150 or so it cost to process a returned ring, Watkins says. “It’s almost becomes a marketing vehicle for us, no one asks for a free ring sizer unless they’re actually buying a ring.” Offering the ring sizer has cut return rates 20%, he says.
Reviews are another tool for giving potential customers more information about an item they may want to buy and cutting return rates in the process. For instance, Deckers Brands, which operates eight retail sites for its shoe brands including Ugg Australia, found that a number of consumers were returning shoes because many of its products only come in full, not half, sizes and they didn’t know the right size to order, says Jesse Carstens, the retailer’s online fulfillment manager.
Deckers solved the problem by asking reviewers to answer two questions about sizing and width to help other customers know which size they should buy, he says. And to handle products with few, if any, reviews, the retailer relies on product specialists assigned to each brand. Their job includes taking measurements and trying on products and including their findings in the product details section.
Stage is taking a different approach. The retailer is switching to a new online review system from Power Reviews Inc. that will enable it to import reviews from manufacturers’ websites, along with those it gathers on its own sites to provide more product information to consumers, Hunter says. “You can only explain so much in the content section of a website,” he notes. Reviews help flesh out that information and, he hopes, persuade customers to buy.
Some retailers save money simply by limiting the costs involved in accepting returns. For instance, Spreadshirt, which sells custom-printed T-shirts and other personalized clothing, doesn’t ask customers who receive the wrong color item or an incorrectly printed item to send those items back. Instead, the retailer asks them to send a photo of the item and then issues a refund, says Marie-Luise Wendt, head of global customer service at the Germany-based site.
In an effort to cut down on returns of products that don’t turn out looking like what customers expected, the site created its own software to guide consumers through the shirt design process. The software aims to address such issues as removing white backgrounds from JPEG logos consumers upload so they can be printed on shirts.
Incorrectly-printed custom-designed shirts can’t be sold again, which is why the site tries to make sure customers get just what they expected. When customers call with complaints about products purchased, those are classified by reason, such as sizing or color, and an assortment team evaluates them weekly to make adjustments to what is sold on site. The site advises customers to do a small test order before placing a larger one to ensure they’re getting the color, size and printing technique they expect.
Knowing what led to returns can help a retailer avoid future returns, which is why Man Crates, which sells specialty items such as engraved beer glasses and exotic meat gifts, evaluates the reasons items are returned or complained about. “If we have product that people are returning or having problems with, we just stop selling those products,” Beekman says.
Returns that Man Crates receives typically result from products breaking in transit. The company provides shipping labels for returns and will arrange for FedEx to pick up a package at a customer’s house. “I don’t want to have someone run an errand to correct one of our mistakes,” Beekman says. Once returns arrive at Man Crates, “the goal is to process those packages the same day they come back,” and resalable items are returned to inventory, Beekman says.
Replacement packages go out with a package of jerky, which Man Crates calls its apolojerky, a small apology for inconveniencing a customer. “There’s always something that we’re giving to our customers in exchange for them to help us out,” Beekman says.
Man Crates isn’t alone in trying to garner customer goodwill, and additional sales, during the returns process. At Stage Stores, 50% of its items sold online that are returned get returned in a store. The chain has set up point-of-sale stations that make exchanging a returned product very simple for customers, Hunter says. Online buyers also receive coupons for discounts on subsequent purchases. “We have done as much as possible to encourage additional purchase,” Hunter says.
Seeing returns as opportunities for additional sales can dramatically change how retailers think about returns. After all, if the returns process goes smoothly, returns can help retailers build lasting relationships with customers.
John N. Frank is a freelance reporter based in Evanston, Ill.