Contributions to Profit Profit From Your Returns
By Jim Gilbert
There tends to be a collective mind-set among customers that the return process always will be a giant hassle. Anyone who has bought a product via mail has at least one horror story about returns.
But I've also heard the opposite. In fact, I've heard people brag about how easy the return process is when they've had a good experience.
A clear, concise return policy, with exceptional customer service, is a must if you want to compete today. And that return policy needs to be seamless throughout all your channels, no matter where the purchase was made. So where do you start?
1. Check out your guarantee. Can it easily be stated? If it's too complicated, make it simpler. Take a look at your order form, your Web site and your shipping materials. Do you state your guarantee and return policy? Are they easy to find? Ask someone who's not part of your company to find your policies and report back to you. You may be surprised by what you hear. Tip: If your customer feels your guarantee is solid, he or she will perceive less risk when ordering. By reducing the perception of risk, it's easier for customers to make the decision to say "yes" to your offering.
2. Use your enterprise software to track why customers return products. If you don't know offhand your product-return reasons, learn them. By understanding why customers return your products, you can make some powerful changes.
For instance, a company I worked with analyzed its returns and found that the way the pictures were presented in its catalog wasn't representative of the items people actually received. By changing how products were photographed, the company decreased its return rate. The net result: more gross profit.
3. Maintain strict quality control in your fulfillment center. If customers return products because they were sent the wrong items, you might have an internal quality-control issue.
Also, ensure your shipping personnel pack orders in an appealing way. Remember, you never get a second chance at a first impression. If your customer opens her box and the item's improperly or sloppily packed, it reflects badly on your company and can increase your return rate.
4. Don't accept returns when you can accept exchanges. Customers return many items needlessly. Having spent much time in the fashion industry where more than 30 percent return rates are the norm, I know fit and color are among the top return reasons.
Ensure your customer service reps (CSRs) are trained in the art of turning returns into exchanges. Often this can be accomplished by simply having the CSR offer an exchange. The communication can be as simple as, "Ms. Jones, would you like us to ship you the item in a different size, color, etc.?" A CSR also can use his cross-selling skills by saying, "By the way, Ms. Jones, many of our customers who ordered item X also ordered item Y. Would you like us to send you that one instead?"
Some companies will even pay for the inbound and outbound shipping on an exchange situation — another way to reduce risk and save the order.
Tip: Make sure your CSRs aren't too aggressive in offering upsell and cross-sell items on the original order. Monitor returns on both the aggregate and individual CSR level.
5. Employ your circulation planning and returns know-how. There's a housefile segment of customers who've purchased once and returned. On the books, they're "zero dollar, zero frequency" customers. I've mailed this segment for a number of mailers and been profitable. You might want to test this segment as well.
You likely will see a higher return rate, as some people chronically buy and return products. Through testing, you might see that despite higher return rates, enough product stays in customers' hands to meet profit expectations. Consider that this segment should be in line with your list-rental goals and the higher return rate is offset by the fact that there's no list-rental fee.
Jim Gilbert is the former vice president of operations and direct marketing for a Florida-based catalog company and is the president of Gilbert Direct Marketing, a catalog and direct mail consultancy. Contact him at (561) 302-1719 or firstname.lastname@example.org.