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Posted Date: 9/25/2012

Making a Difference with Returns Management

By Deena M. Amato-McCoy
Every retailer's goal is to satisfy customers and present them with the best shopping experience possible. Creating a best-in-class returns process can be a differentiating factor enabling apparel companies to draw closer to that goal while forging stronger customer loyalty.

As retailers transition toward integrated multi-channel operations, they are learning that consistent returns policies must be a core piece of their business. The challenge comes in striking the right balance between policies that are too restrictive and those that are too lenient.

"Retailers want a returns policy that can drive customer loyalty and make [customers] comfortable making a return, not one that is so restrictive that it takes a toll on sales," said David Sisco, director of retail and consumer goods marketing at UPS, Atlanta.

And retailers are making inroads, improving customer satisfaction across channels. In fact, 86 percent of consumers highly rate their online shopping experiences, according to the "2012 Customer Experience Study," a report from Reston, Va.-based comScore that was based on responses from 3,100 online shoppers. However, 65 percent of these shoppers are least satisfied with the ease of multi-channel returns and exchanges.

Overwhelmed by returns
Sierra Trading Post, Cheyenne, Wyo., a retailer of seconds, overstocks and closeouts of name-brand outdoor apparel and gear at discount prices, was no stranger to these challenges. The company is primarily an online and catalog retailer but also operates four stores, processing 90 percent of its sales online and approximately 5 percent of transactions at the store level. While shoppers are able to return merchandise at brick-and-mortar stores, their small number forces most shoppers to return purchases via mail and UPS.

In the past, when the holiday season hit, the rate of returns would surge tremendously, and the increase in volume made it difficult for the company to process returns at an adequate pace. "We would get so consumed by returns in our postal service containers that it would take up to two weeks to process incoming returns during this timeframe," said Bob Koehler, customer service director of Sierra Trading Post. "We needed to handle our returns in a more efficient way."

The company's goal was to slash processing time and give shoppers quicker access to refunds, hopefully to be used on a future purchase. The ideal solution was two-fold. The first step was to create a partnership with UPS and leverage its experience as a logistics leader. This included integrating a new returns management process that promoted merchandise traceability across the supply chain, as well as new materials handling equipment in-house to process returns.

Sierra Trading Co. is not alone in this quest. In fact, 36 percent of retailers currently have real-time access to internal returns management solutions, and another 25 percent plan to adopt a similar strategy within the next 24 months, according to "The State of Loss Prevention in Retail: Controlling Losses and Maximizing Profits," a report from Aberdeen Group, Boston.

Speeding up the process — and making the customer happy
At the core of Sierra Trading's new returns process is a bar-coded returns label that is shipped with the order. Shoppers can give the package to a UPS driver or return it to a UPS drop-off point. Returns are gathered nationwide and sent to UPS hub locations in Denver, Co. or Cheyenne, Wyo., respectively, where they are consolidated onto one truck that transports merchandise to Sierra Trading's returns processing department at its distribution center in Cheyenne.

"We process around 1,300 incoming packages a day, and that amount doubles in November and December," Koehler explained.

The company upgraded its materials handling equipment to help improve the returns process. A materials handling conveyor system moves returned merchandise off of inbound trucks. From there, it is moved on to the proper department for handling

At the returns department, the bar-coded label is scanned upon arrival, retrieving the original order and providing routing status and immediate notification that the order was received by the retailer. Internally, the barcode also reveals thumbnail photos of ordered merchandise, "which speeds up the process since associates do not have to type in order number and match the list of items in the orders," Koehler added.

This process also supports an instant store credit workflow, giving shoppers the ability to place an order and use that credit within 24 hours of making a return. "Once the returned merchandise barcode is scanned, shoppers get an immediate e-mail response that the return arrived in our facility and that the order will be processed within 24 hours," he said. "The message also alerts them that they have instant store credit that can be used as a payment method on their next order."

Sierra's automated returns management process is also benefiting the company by enabling associates to almost double the number of returns they process in an hour. "Previously, we processed approximately 15 pieces per hour, and now we can process an average of 25 per hour," Koehler said. "We credit the technology, the barcode scanning process, as well as associate training for impacting such a significant return on our investment."

The type of information that programs like this offer to customers also functions as a key differentiator in a saturated retail marketplace. Sixty percent of online shoppers, for example, report that they want an estimated or guaranteed delivery date at checkout, while 24 percent of consumers will abandon their online shopping carts if the retailer cannot provide this information, according to comScore. Further, 75 percent of consumers report that receiving tracking information on their online return is a service that all retailers should offer.

Pleased with the results of its new system so far, Sierra Trading continues to evaluate how to add more efficiency within its returns processes. The company's next priority is to rewrite its in-store credit program so that it can more quickly add returns back into stock available for sale. Recently, it expanded the system to allow shoppers to receive refunds for merchandise returned within six months, "to be more appealing to shoppers," he said. "Many other companies don't offer this service, and we hope that the move will reduce the number of returns in the long-term."

Deena M. Amato-McCoy is a New-York-based free-lance writer specializing in retail technology.

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