Completing the Circle

Its roots as a family clothing business planted nearly a century ago, Children’s Wear Digest Inc. has gone through several changes since Julius W. Klaus kicked things off in 1911, when he co-founded a wholesaling business that sold brands like Buster Brown and Fieldcrest. The Children’s Wear Digest name launched in the 1980s as a Klaus-family-owned retail catalog, and today the company is best known by its web site name, CWDKids.

Apparel styles and brands have changed many times over the years, but one thing that has remained constant is the challenge of delivering through a direct channel apparel that properly fits young customers so they and their parents are happy and CWDKids avoids the chore of processing returns.

A main concern

“Fit is the most important thing, but it’s hard to convey properly through the web or catalog,” says president James Klaus, representing the family’s fourth-generation in the clothing business, noting that CWDKids does about $30 million in sales, 40% of it on the web.

It’s not that CWDKids hasn’t tried. “Returns have always been a main concern, and we’ve tried to nip returns in the bud before shipping to a customer,” Klaus says. “Before sending products to our warehouse, we get vendors to send a size run of each product to our corporate office. We have forms like mannequins for each product size, so we can try on each product and note any discrepancy in sizing. If the size is totally off, we won’t accept them.”

Still, returns have remained a challenge, pushing CWDKids to seek an even more proactive approach toward improving overall customer service.

Now, thanks to web-enabled technology from NewRoads Inc. that integrates its returns system with other applications, including order management and fulfillment, CWDKids is getting more proactive in preventing returns in the first place. By using aggregated information compiled in near real time on why customers return items—because, for instance, boys’ swimsuits are running smaller than expected—CWDKids has taken steps to modify product descriptions to inform shoppers of what to expect, and worked with suppliers to remedy products for the long run.

“Customers don’t want to have to return things, so they appreciate the information,” Klaus says. In some cases, CWDKids has cut by as much as 50% the amount of returns for a particular product category, he adds.

Multiple operations

In addition to cutting back on returns—saving on shipping and liquidation costs as well as making for happier customers—retailers like CWDKids are learning to turn the returns process from an annoyance into a tool for improving multiple operations. As they gather aggregated information on all returns, including customers’ reasons for the returns and related data such as customer demographics and seasonal trends, merchants are realizing some of the key promises of the Internet age from an unlikely source—the often overlooked returns process, experts say.

“Retailers have been getting better at tracking and integrating data from different customer touch points, but the next phase will be what they do with it,” says Patti Freeman Evans, retail industry analyst with Jupiter Research. She notes that retailers are learning to use aggregated customer data on returns in the way that comparison shopping sites use aggregated customer reviews of products. “As retailers get information on returned products in critical mass, it means something,” she says. “That’s the next phase in returns management.”

The trend could go a long way toward alleviating a big obstacle to online shopping, Freeman Evans adds. A recent Jupiter Research report found that 39% of Internet users cited expectations of a complicated returns process as a reason they don’t shop online.

Gathering basic information on returns is not new. Retailers have long tried to get feedback on why customers send things back, and they’ve compiled data on what products experience the highest return rates. But gathering that information has been slow and the data incomplete, as retailers have relied on information entered from return labels into software systems designed to produce batched reports. Moreover, the information typically wasn’t aggregated so that a retailer could view, for instance, how often and why a particular SKU was being returned during a particular selling season, or available in real-time data available to all selling channels.

Feedback to suppliers

“Retailers have always had information on specific returns, and then worked with vendors to change products,” says Hank Reeves, CEO of NewRoads. But by using web services technology that integrates the returns process with multiple applications, retailers can step up their level of dealing with both vendors and customers to better leverage information on returns, he adds.

At CWDKids, where seasonal sales are crucial to its overall selling strategy, the retailer relies on reports of returned merchandise to better plan seasonal merchandise. “We look at things year to year,” Klaus says. “At the end of spring season, we’ll print out a returns report to show why items were returned, then we may change product specs with a vendor for the following year. If a size 6 isn’t fitting as a size 6, our vendors find out quickly that their specs are off. They appreciate the feedback.”

Another key difference in web-based returns management systems, adds David Himes, senior vice president of NewRoads, is that they can be tailored to a retailer’s particular needs for information and customer and vendor interactions. Customer information on returns can be entered directly by customers onto a retailer’s web site, where it’s immediately entered into integrated software applications, or initially entered onto paper returns forms or phoned into a contact center for re-entry into an integrated software system.

A retailer might choose to focus on using returns data to improve the quality of supplies coming from vendors; or it might develop more sophisticated customer relationship management programs; or it might forge a better multi-channel shopping experience by making online order records visible through store POS terminals. “Now returns information can be integrated throughout a retailer’s applications, so a customer gets an instant credit notice of a returned item, for instance, or can return an item purchased online to a store,” Reeves says.

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Faster credit

Jennifer Melzer, customer care manager for Road Runner Sports, says she relies on a SmartLabel Returns Center returns system from Newgistics Inc. to cut by more than half the time it takes to inform customers of the status of their return and their credit. In addition, the return status reports—which Road Runner receives from Newgistics within 48 hours of when a customer sends back a product, instead of the former time of 5 to 7 days—enables the retailer to better plan its warehouse staff for processing incoming returns.

“The real benefits are that our customers get an automatically triggered e-mail that informs them of their return, and our knowing what’s coming back,” she says. “If we know that X amount of returns are coming next week, we can plan to have enough people on hand to process them. This has really helped us meet our deadlines so that it takes about a week and a half for customers to get a credit.”

For many retailers, the returns process is still a backwater that gets overlooked as an important tool of customer service, Freeman Evans says. “Few retailers actually have a good return policy, and few use it to improve the comfort of customers,” she says. “And the returns policy itself is hard to find on many retailers’ web sites.”

But that may change as more retailers recognize the ability of the returns process to help improve multiple operations, and to bring customer relationships full circle. Most retailers, Freeman Evans notes, work hard to create a trusting relationship with customers on the front end through marketing and merchandising. “That trust continues throughout the customer relationship if the retailer does returns well too,” she says. l

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How streamlining returns can cut costs

Efficient returns processes may improve the relationship with the customer, but it also can streamline a retailer’s operations. Take Overstock.com, which implemented the ReturnCart system from Newgistics late last year. The pure-play discount retailer has reduced by more than half the number of customers who contact its customer service agents to ask about processing a return, says vice president of operations Tad Martin.

“Before we changed to this system, every customer either e-mailed or called us to initiate a return,” Martin says. “But now more than half are initiating and processing the return themselves.” That has freed up Overstock’s customer service reps to handle other calls and to focus on marketing and cross-selling.

Overstock customers can use the ReturnCart system to return an entire order or parts of one by filling out a form in the My Account/Returns section of Overstock.com. Overstock worked with Newgistics to input its own business rules to automatically accept or deny a return request entered online, and the ReturnCart feature automatically determines the optimal shipping option and calculates any return fees before the customer prints out a SmartLabel return slip. “This eliminated the need for an Overstock customer service rep to handle any portion of the return request,” says Jonathan Dampier, vice president of marketing and corporate strategy for Newgistics.

By integrating with carriers, the ReturnCart system alerts Overstock about the status of returns, including the weight of packages. That enables Overstock to send a confirmation and notice of a credit while the return is still in transit, instead of waiting until the return has been received at a warehouse, Martin says.

“If we verify that the return is the same weight of the package we originally sent, we may immediately send an e-mail to the customer, saying ‘The returned package is on the way, here’s your credit,’” he says. “If we can get a credit to them a few days earlier than expected, it creates a good feeling for customers.”

At outdoor sports gear retailer Moosejaw Mountaineering and Backcountry Travel Inc., deployment of the ReturnCart system has virtually eliminated e-mails to its contact center from customers seeking information on ordered or returned merchandise, Moosejaw CFO Jeffrey Wolfe says. “This will allow us to double our business this Christmas season without a huge increase in staff,” he said before the start of the 2005 holiday shopping season.

Newgistics provides SmartLabel return slips that Moosejaw places in each order with the customer’s order number; if a customer wants to return an item, she fills out the label, attaches it to the package and drops it in the mail. Newgistics picks up the package from the Postal Service and scans the SmartLabel’s bar code to forward confirmation of receipt to Moosejaw, triggering an automated e-mail to the Moosejaw customer about the status of the return, Wolfe says.