July 30, 2003, 12:00 AM

Returns Processing

Returns continue to be a fact of life—and so vendors continue to devise innovative ways to deal with them.

Returns are not new to retail-just ask catalogers. But as consumers shift more spending to the online channel and new online shoppers come on board, web merchants will find returns increasing, right along with sales. Depending on the product category, web and catalog purchases represent anywhere from about 5% to 25% of sales, according to industry reports.

But returns represent a greater loss to web and catalog retailers than simply lost sales on returned items and the added expense of disposing of them. A large contingent of consumers doesn’t shop online specifically because they prefer to avoid what they see as the difficulty of returning goods purchased there. More than 40% of all consumers don’t buy direct either online or from catalogs for this reason, according to some industry estimates. A Jupiter Research consumer poll found that 17% of online shoppers surveyed had purchased an item in a store versus on the web because they expected the returns process for items bought online to be problematic.

Tapping an opportunity

But another finding in the Jupiter survey suggests that smart retailers will see opportunity in what current and potential online customers view as the hassle of returns. 36% of online shoppers surveyed say they could be influenced to shop at a web store that offered free shipping on returns. That suggests an untapped market of shoppers who would expand their online spending if they could be convinced a return would be no more difficult than it would be if returning to a store-maybe even easier. Recognizing that, providers have stepped up with end-to-end solutions for e-retailers that pair returns management software with real-world shipping and handling capacity.

Newgistics Inc., for example, has partnered with R.R. Donnelley and USF Processing on the Smart Label program, an option for returning merchandise. The Smart Label arrives as a preaddressed return label with the shopper’s order. The bar-coded label, attached to return packages that can be dropped in U.S. Postal Service mailboxes, gives Donnelley early visibility into package disposition.

That speeds up processing on the back end, saving retailers cost by getting the returned items back out into a secondary market more quickly. It also improves the returns experience for customers by broadening drop off points to any Postal Service mailbox and by informing them via e-mail of the package’s status.

And Donnelley and Newgistics aren’t the only ones to partner in offering new returns-handling options for e-retailers. Supply chain management services provider Kewill Systems Inc. recently beefed up an agreement with FedEx Corp. subsidiary FedEx Corporate Services to develop a web-based application that automates the returns process for both merchant and customer via access to a network of thousands of FedEx drop-off points. The application, hosted by Kewill, lets merchants link their return shipment requirements to the drop-off location, allowing the local agent or clerk to process the return package based on the merchant’s instructions. Scanned at the drop-off location, the package gets a FedEx tracking number that can be used by both the merchant and the customers to check status online. The program lets merchants anticipate the delivery of returns, gaining more control over stock levels, restocking demands and the management of damaged goods, FedEx Corp. says.

Competitive issue

And United Parcel Service of America Inc. is offering a Returns on the Web service, through which shoppers can request a UPS return shipping label from a merchant`s web site. The label is instantly delivered via browser or e-mail, then the shopper prints it out, affixes it to a package and drops it at a UPS facility or hands it to a UPS driver. Online shoe retailer Zappos.com says the service has enabled it to offer free returns as a means of building customer relationships.

RoadWay Reverse Logistics Inc., a subsidiary of Roadway Express Inc., has also recently launched a web-based product returns validation and transportation management product suite providing a simplified, controlled returns process targeting retailers, manufacturers and distributors.

“To maximize profitability and remain competitive, businesses must better understand and control the growing complexity of the costly returns process,” says Paul Nichols, CEO of Kewill Systems. But the benefits could go beyond cost-cutting to boosting sales for e-retailers successful in streamlining returns for shoppers: 75% of those polled in a recent Benchmark study say they’d buy more from a retailer if the returns process was convenient.

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