Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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New revenue source
The retailer pays the cost of the return, then charges the customer for the return postage. Retailers are free to set fees to customers at whatever level they wish. One SmartLabel customer charges $5.95 for all returns; another charges by weight with a range of $6 to $8.50; the third charges $4.95 for one item and $7.50 for two items, Mitchell reports. Thus the SmartLabel is another source of revenue for the retailer. In the postcard survey of consumers who had used the SmartLabel return, 87% said they were satisfied with the value of the SmartLabel, Mitchell says. “Consumers value convenience more than anything and they’re very willing to pay for it,” she says.
Key part of a strategy
Converting the returns process to electronic processing can result in significant savings, Gartner reports. Electronic processing of a custom label with a bar code costs under $2 vs. nearly $12 for manually processing a package with a plain label, Gartner says. Automated acknowledgement of receipt of package and verification that the refund is in process cost less than $1 vs. about $6 for a manual process, it says. As vendors offer electronic processing of returns, retailers who don’t use such services will be at a competitive disadvantage with reduced profit margins and the possibility of losing online customers who are attracted by the convenience of returns at retailers who do offer such a service, Gartner says.
Mitchell says a number of Newgistics’ clients want to use the SmartLabel as a customer acquisition tool, noting that surveys show that 44% of consumers don’t purchase remotely for fear of having to make a return.
The value of the SmartLabel, thus is not just in driving out costs or creating a revenue stream, Mitchell says, but also in the positive shopping experience it creates. “Merchants understand that their policies and services are important differentiators,” she says. “Returns are an integral part of that strategy.”