Get Returns on Your Returns

With the advent of omnichannel retailing, the subject of customer returns has become a hot topic for retailers. The financial impact of returns has always been a factor for traditional retailers, but the evolution of customer-centric omnichannel retailing has pushed this issue to the forefront. In fact, we've seen some very pointed discussions in the media the past couple months. Consider the following:

• This article in Bloomberg Business shows how retailers are using new analytics to significantly cut their return rates.
• An eye-opener in Fortune took a by-the-numbers look at the marked increase in fraudulent returns.
• NBC News noted retailers' increasing concern with shopper "wardrobing" and serial returns.
• Gartner published research for supply-chain heads showing how improved returns management could positively impact profits in multichannel retail businesses.

When you consider that apparel retailers typically see return rates of 20 percent to 40 percent, it's clear this is a huge financial issue. Sales, gross margin and cash flow are all strongly affected. If you looked at overall returns as one of your "suppliers," you'd likely conclude that returns comprise the largest single supplier to your business! It follows that returns are deserving of considerable attention.

Omnichannel retailing — where purchases originate in any channel and are fulfilled from multiple locations — adds importance and complexity for all retailers. I've been saying for some time that the omnichannel systems and processes of the future will reflect the best planning strategies of brick-and-mortar retailers and direct (i.e., internet and catalog) retailers. As brick-and-mortar retailers address the growing challenge of omnichannel returns, they'd be wise to follow the path laid down by those already involved in direct retailing.

Here's why: Direct retailers, as we've seen with many of Direct Tech's customers, have a leg up on their store counterparts. Operationally, it's always been critical for these omnichannel retailers to have rapid returns handling processes in place. That way, they can receive, process and re-inventory first-quality returns, and quickly make them available for selling in the relevant channel.