6 simple steps to turn around your returns management.

Returns are a necessary evil of any retail company. Some fitness products have less than 1 % returns rate, other product categories can be returned by 20 % of customers. Even in the same category product quality and brand play significant role.

I want to share my experience with a dropship online retailer selling over 50,000 different products. Some of our vendors accepted returns but vast majority did not. So, we were stuck with one-off situations and needed to develop a system to turn around our returns management.

Here is how our returns section at our 3PL warehouse looked. Needless to say that liquidation value of these products was extremely low. Not only did we let the returns spoil but also paid hefty storage fees for these boxes.

There were three main reasons for customers to return our products: damage in transit, missing parts/ manuals and customer remorse. In each of scenarios product have different liquidation value and must be processed differently. I`d like to share the process that worked marvelously for us:

  1. Each return request gets categorized (damage – D, missing component – MC, customer remorse – CR).
  2. Damages are approved for a return upon receiving photos demonstrating the damage, missing components and customer returns are forwarded to Customer Service for a follow up.
  3. Frequently, customers missing parts or dissatisfied with the products can be convinced to keep the products by offering them a discount and (or) arranging a part to be shipped (thus keeping the profits and avoiding returns expenses).
  4. First three steps help significantly reduce returns and collect per product statistics for further analysis. Now, if return is unavoidable – customer is asked to write on the box the Returns Authorization number in a format “PO number – Returns Reason”. For example PO#124632-D for a PO#124632 damaged in transit.
  5. Warehouse receiving team inspects each customer return and records appropriate Returns Authorization number along with the product state (Back to stock, Re-Box, Refurbish, Discard).
  6. Returns team reconciles the data and arranges consolidated shipments of salvageable returns to a liquidator.
This simple process had a huge impact on our operations. Returns fraud went down to almost zero; our return rate dropped a few percentage points and we recovered over $250,000 by liquidating what used to be a pile of crap.

Look at how our warehouse looks now – better isn`t it?

Retailers say unnecessary returns cost stores $16 billion dollars a year, so more and more chains are fighting back with policies and practices that make it tougher to return things. They're shortening the time you have to return items after they're bought, hitting customers with hefty "restocking fees" on returned items, and cracking down on "serial returners" with new, sophisticated ways.

The retailers started imposing a restocking fee of 15 percent of the purchase price on all electronics products that are returned after they've been used, or with missing parts or manuals. And while they give you 90 days to return other products, you now have only 30 days to return electronics items.

Many major retailers are even using hi-tech computer systems that track every return you make, and put a red flag on serial returners. For instance, Wal-Mart has a system that automatically flags customers who try to return more than 3 items without receipts in a 45 day period. If you surpass that limit, they won't accept your returns. If you don't make any returns without a receipt within a six month period, the red flag goes away.

Good news is you can turn around your returns without fighting with your customers. Use our blueprint or give us a call and let us solve your returns puzzle.

Outsource troubles – focus on sales. Thriving is fun!

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Anonymous John Malone said...

While I agree that there is a great necessity for improving customer returns management, I'm not really sold on the 6 items mentioned on this post. Those items are not new and should be integral part of the handling returns transactions.

Point #3 very very seldom happens, based on my experience. Once, a customer made up his mind to return an item, he usually commits to his reasoning. It is very hard to sweeten the deal for him anymore because it's already 'spoiled' - thus the initiation of the return.

When suppliers have a solid and clear PRODUCT RETURNS POLICY that is also customer-friendly, all they need is to facilitate the returns process way easier.

For example, and this is probably one of the top processes that a supplier needs to improve on in order to gain real improvement, is to use an automated product returns software to simplify the returns transaction. I have noticed a trend in this area, a growing list of companies that are now using RMA PORTAL.COM for quick real "turn around" in processing returns.

There also other sets of returns management software out there like FrontEnd returns, RenewifyRMA, etc.

My point is, a real turn around should be something measurable. Those apps mentioned above gives you the ability to produce reports to properly measure KPI.

August 21, 2015 at 2:03 PM  

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