December 28, 2001, 12:00 AM

Finding the return in returns

If successful, Newgistics Inc.’s ReturnValet could raise the bar for the rest of retail by making the effective handling of returns into a competitive edge and could shave as much as 50% off a retailer’s current cost of returns.

Returned goods are e-retail’s hot potato. Bouncing from dissatisfied customer to carrier to warehouse and then on to store or liquidation, they present a problem and a cost every step of the way. But Austin, Texas-based Newgistics Inc. has pulled together an alternative in its ReturnValet service. If tests by Spiegel Group companies in five markets are successful this holiday season-and they got off to a good start with several thousand customers using the service in the first two and a half weeks-ReturnValet could raise the bar for the rest of retail by making the effective handling of returns into a competitive edge and by shaving as much as 50% off a retailer’s current cost of returns.

ReturnValet presents retailers with an end-to-end solution. Customers get something too: a network of neighborhood mail centers set up by Newgistics to receive packages. The neighborhood centers are equipped with software that, depending on the retailer’s instructions, can credit customers’ accounts for the return almost instantly.

Customers take packages to the drop-off centers and pay for shipping the return. A share of that charge goes to the mail center and a share to Donnelly Logistics for picking up the packages and transporting them to two warehouse processing companies, USF Processors and Spiegel-Hermes.

A share goes to Newgistics too, but the rest of Newgistics’ revenues come from retailers paying for processing costs on the back end. Newgistics says it can process more cheaply by aggregating package handling. From the processing centers, its system routes the returned packages where they need to go-back to the store, to a liquidator, or to another outlet. By reducing the number of packages coming back to the store, where per-package processing costs are typically higher, and by streamlining the process with bar-coding on each package that alerts the next point in the chain as to what’s in the package and how to handle it, Newgistics says it can deliver reverse logistics for 35% to 50% less than retailers’ current processing costs.

ReturnValet expects to roll out nationally with Spiegel this year; the service also will be available to customers of Lillian Vernon, which tested ReturnValet in Dallas-Fort Worth last holiday season, and Sincerely Yours.

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