January 3, 2005, 12:00 AM

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Which customers are most vulnerable to attrition? The first-time customer who buys something that is not what she expected. “The stakes are really high with a first-time customer who has to make a return,” says Jonathan Dampier, vice president of marketing for Austin, Tex.-based Newgistics Inc., provider of return services to online retailers. “Our 50+ retail clients tell us that the first-time buyer who makes a return has the highest attrition rate.”

Newgistics is addressing that vulnerability with a series of return-related products that can help the retailer not only save the sale, but also cement the relationship with the customer. Among the services it is providing is the ability to send an e-mail message to the customer as soon as the retailer knows the item has been returned offering a discount on future purchases. “It would be relatively easy for a retailer to institute a first-time buyer program that reaches out to a customer within a day or two of when they mail the item back and make them an offer on their next buy,” Dampier says.

High importance

Such proactive handling of a return is part of a bigger strategy that seeks to turn returns into positive customer experiences. Such a strategy could pay off, say the results of a survey that Newgistics commissioned from Harris Interactive. That survey reports that 88% of U.S. adults who have shopped online or through catalogs consider a convenient returns policy to be very important, important or somewhat important in choosing to shop direct rather than in a store. 92% are more likely to shop with an online merchant who makes returns easy and 85% say they are unlikely to shop with a merchant where the process is not convenient.

Turning the return process into a positive experience could pay off, the survey says. 88% of shoppers are very likely, likely or somewhat likely to take advantage of a discount on the next purchase. 61% said they would use the discount even if it meant going to a store.

Furthermore, the survey shows that despite the fears of some online retailers, returns are not necessarily a bad thing, Dampier says. When making a return, 33% of customers are more likely to exchange the product than to seek a refund and 40% are equally likely to ask for one or the other. 24% are more likely to ask for a refund. Other research shows that returners are often the biggest buyers. “You can’t lump returners into one group and treat them all the same,” Dampier says. “In fact, three-fourths of customers who make a return are open-minded about continuing to do business with that retailer, making the return a valuable touch-point for retailers to influence.”

Newgistics believes that its SmartLabel program contributes to making the returns process easier for customers and thus adds to a favorable shopping experience. With that service, customers receive a pre-printed, barcoded label with their orders. If they want to return the merchandise, they affix the label to the package and drop the package in a mailbox. Returns go to a consolidated center, where Newgistics equipment reads the barcode and reports the return right away to the retailer.

Not all returns are bad

That way, the retailer knows what’s coming back and can staff the warehouse to handle it. But just as important, the retailer can get in touch with the customer, let the customer know the returned package has arrived and offer an incentive to shop again. The barcode contains information about what’s in the package, but a recent refinement also give retailers the option of including information about the customer. For instance, it can be encoded to indicate that the returner is a first-time customer and should get one type of offer or is a high-value customer and should get some other kind of treatment. “Returns analytics helps retailers understand that not all returns are bad,” Dampier says.

Another benefit of making the returns process easier, Dampier notes, is that it gets merchandise back into the sales stream faster. A Newgistics’ survey of consumers who used the SmartLabel showed that they returned their merchandise to the retailer an average of 7 days faster. “If it’s going to be returned, it’s inventory,” Dampier says. “There’s no point in having that inventory sit in someone’s trunk. Anything you can do to accelerate getting that inventory back into stock makes a lot of sense.”

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