June 3, 2008, 12:00 AM

Assurz tells retailers its returns service is no more

Home improvement e-retailer eImprovement and other merchants have been scrambling to remove the Assurz logo from their sites after a sudden notice on Friday from Assurz Inc. that it was terminating its third-party returns and refund service.

Home improvement e-retailer eImprovement and other merchants have been scrambling to remove the Assurz logo from their shopping carts after a sudden notice on Friday from Assurz Inc., a third-party returns service, that it would no longer honor its no-questions-asked return and refund program.

“The notice was out of the blue, no phone call to say, ‘Hey, things aren’t going well,’ just an e-mail that our service was cut off and that was it,” says Michael Fox, co-founder and chief operating officer of eImprovement.com LLC.

Calls by Internet Retailer to Redwood City, CA-based Assurz were not returned today, including one placed to the cell phone of CEO Steve Hoffman. One former executive reached by cell phone, former senior vice president of sales and business development Gregg Gumbinger, said he had left the company late last week and was unable to comment on the company’s operations. He referred calls to Hoffman.

The executives in charge of the Assurz account at the company’s two financial backers, San Jose, CA-based Western Technology Investment and New York-based Proctor NBF Capital Partners, also did not return phone calls.

It could not be determined to what extent Assurz was still operating. Fox says he talked to a customer service rep earlier today regarding what to do about outstanding customer accounts, but that the rep wasn’t able to provide clear answers about the company’s future course. Calls later in the day to customer service went unanswered, Fox adds.

Another retailer client of Assurz who asked to remain anonymous also said it had received the same sudden e-mail notice of service termination on May 30 and had been unable to speak directly with any Assurz executives.

Ironically, Assurz appears to have succumbed to its own success in getting consumers to use its service, Fox says. “At the end of the day, they apparently didn’t take into account that the number of returns would balloon,” he says.

Fox adds that about 500 of his customers opted for the Assurz service each month, about 3% of total orders, and that it appeared to result in higher conversion rates and sales on eImprovement.com and its sister sites, which include eFaucets.com and HomeFixtures.com. But it also increased overall return rates from about 5% to 9% after eImprovement starting offering the Assurz service in January, because 6% of the customers who opted for the service returned products, he adds.

Among customers who did not opt for the Assurz service, Fox says his company’s average return rate of 5% went down to about 3%. The drop probably resulted at least partly from the fact that many of the customers who would have returned an item opted for the Assurz service, he adds. With the Assurz service discontinued, he expects his overall returns rate to once again hit about 5% or less.

In its May 30 e-mail notice to eImprovement, Assurz, citing a contract stipulation that lets it discontinue service with a three-day notice, said it would terminate its service as of June 2 because “your refund rate has been consistently greater than fees we have received for the services, leading to cumulative net losses from refund payouts by Assurz.”

Assurz operated on a business model that charged a fee, starting at $1.99, that shoppers could opt to pay when placing an order on eImprovement.com or other client sites for a guaranteed, “no questions asked” return and refund service. Assurz would cover the return shipping of any product that was undamaged to its own warehouse and refund the entire purchase amount to the buyer, leaving the client retailer free of any related responsibility. Assurz, which charged no other fees to retailers, would then liquidate the returned products.

The common selling point for the Assurz service was that shoppers could buy something-particularly costly to ship items like bath tubs or other home improvement products-without having to worry about paying for return shipping or restocking fees, Fox says.

But the popularity of the service apparently became too costly for Assurz to handle, Fox says. “It worked very well, but maybe that was the problem,” he says. “If you allow shoppers to return something, they often will.”

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