6 simple steps to turn around your returns management - (Part 2)

Returns management is a big challenge for any retailer; you always wonder how to ensure customers don't return the item. Well it's quite possible with a strong process - read on..

In this part I want to share a little more specific steps to diminish returns. The aim should be to have a return rate of less than 2% for any type of sku in any given month. I want to discuss three different catogories where you can reduce returns.

Returns Policy

Returns could be classified into different types based upon the type of policy you have stated for each sku, one could have a general returns policy for all items and some may have returns specific to each sku.

  • Define rules for return - It should be very clear as to why and how the customer can return an item, the policy should be easily accessible to the customer before and after purchase of the item.
  • Warranty replacement - Most items by default will have a manufacturers warranty, setting up a contract with an insurance company for additional warranty could save returns. The policy should be explicit on part replacement, service arrangement - all under manufacturer's warranty.
  • Damage returns - This could be very tricky; it should be clear as to when and how returns will be accepted upon report of damage. Customers should be able to classify between defective and damaged items.
  • Returns procedure - Most of the time customers don't understand the policies and end up returning an item directly to your head office and claiming a refund for damaged item, this could cause a lot of confusion and we might end up with additional shipping and handling costs. Inform the customer what steps should be followed when he/she wants to return an item.

Handling returns cases

Whenever there is a returns issue, there are several ways to convert it into a sale or atleast reduce the loss.

  • Identify type of return - There are several reasons for return, we need to identify the type of return before we could dive into providing easy solutions. Our policies should be referred to in any case of returns; if the customer has not followed the rules in the policy you can be candid and not accept return.
  • Offer discounts/Goodies - This is a great strategy and works well, when a customer calls for minor damages or defect, offer discount based on the gross profit that you make. This is a better method than getting the item back, paying for storage, liquidation etc. If it's a manufacturer's fault (wrong color etc.), have the manufacturer ship out some accessories free of cost to the customer.
  • File claims - Claims should be filed promptly on any case of damage, this is a good way to claim the additional amount on saved returns.
  • Time frame - Ensure all your return cases are solved within a week's time, the longer you try to work on a returns issue the more loss you will incur. Your customer service team can use that time to bring in more sales; don't waste time on negotiating on items less than $50. Have the customer keep the item and refund, the longer this case is open the greater the loss.

Returns Analysis

This is a very crucial set up that could help you understand what's going wrong and implement corrective action that will help maintain the returns rate per sku to be less than 2%.

  • Data collection - A dedicated team of analysts could collect the daily shipping and returns report, find ways to identify returns per sku and maintain a databse to view monthly return rate.
  • Returns classification - Its important for us to classify the type of return, each sku could have a specific reason for return. Furniture items usually have damages due to inadequate packaging, the relevant data could help us bring out a solution.
  • Negotiating with vendors - This is a very crucial step, upon identifying the issue for returns per sku, If the problem is relating to the way the item is shipped at the vendors end then we need to get in touch with the vendor and request for better service (better packing, shipping etc.)
  • Invoice verification - This final step is to ensure that the vendor is not billing us for having shipped a defective item that was retunrned back or if the vendor had promised us a discount for having the customer keep the item.

Aim at 2% return rate, use combination of in-house and outside expertise, outsource whatever makes sense or if returns management is not your core expertise. I will continue with more in-depth returns management sreategies in the following article.

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