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.
Likewise, merchandisers and inventory planners of direct retailers are also miles ahead on this. Because they have access to customer transactional data across several channels, they're able to determine when and why returns occurred, and can then incorporate that data into their merchandise profit analytics and forecasts. The same holds true for inventory planners, who can incorporate inventory trends into their future inventory projections.
Therefore, brick-and-mortar retailers, when dealing with the challenges of omnichannel returns, look to your direct retail counterparts for insight on gaining control of this critical area of your business.
Joe is Vice President of Product Solutions at Software Paradigms International (SPI), an award-winning provider of technology solutions, including merchandise planning applications, mobile applications, eCommerce development and hosting and integration services, to retailers for more than 20 years.
Joe is a 34-year veteran of the retail industry with hands-on experience in marketing, merchandising, inventory management and business development at multichannel retail companies including Lands’ End, LifeSketch.com, Nordstrom.com and Duluth Trading Company. At SPI, Joe uses his experience to help customers and prospects understand how to improve sales and profits through applying industry best practices in merchandise planning and inventory management systems and processes.