E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
With fulfillment uppermost on retailers’ minds as the Christmas shopping season approaches, many retailers are looking even beyond Christmas. As surely as New Year’s follows Christmas, some of those packages that go out are going to come back. And retailers are constantly looking for ways to make that process less painful for both themselves and their customers.
E-retail industry insiders know just how painful returning a package can be: they gave their own returns processes a score of 51 out of 100 in the latest “Insiders’ View of the e-Retail Industry,” while giving the overall industry a score of 63. Returns achieved the lowest score of any component of online shopping in the survey by ForeSee Results Inc. and Internet Retailer.
So it’s no surprise that FedEx Corp. has already signed up 15 online retailers and catalogers for its new FedEx Consolidated Returns Service. “We like to think of it as a revolutionary return shipping service,” says Jeff Maddock, manager of reverse logistics marketing for Memphis-based FedEx.
FedEx’s new returns service benefits retailers and consumers alike, with a more efficient processing and distribution operation for the former and a more convenient way to return products for the latter, FedEx says. “The feedback we have received has been very positive from consumers and merchants,” Maddock says.
Retailers who want to use the system must be able to issue return authorization codes to their customers. A customer who wants to return a product obtains the code from the retailer, then takes the product to a FedEx office or to an authorized third-party neighborhood drop-off facility. The customer does not have to repackage the product. Retailers will be able to charge the return shipping fee to the customer, with options to pass it through, mark it up or discount or waive it for good customers.
At the FedEx office, the customer gives the merchandise and the return authorization code to the clerk, who keys the code into the FedEx computer system to determine how the retailer wants FedEx to handle the return. The clerk places the product in a polybag, generates a label for the bag, then gives the customer a receipt that includes a FedEx tracking number. “We tried to make it exactly like a return to a retail store,” Maddock says.
The package’s label includes the return authorization code as part of the bar code. That code becomes the package’s ticket to a sorting center within a regular FedEx facility. At the sorting center, a worker scans the label that directs him to the appropriate bin for disposition-back to the retailer for resale, to liquidation or to a reseller.
The system provides the merchant with several benefits, Maddock says. For one, it provides consolidated returns, meaning the retailer is dealing with fewer packages. For another, it alerts the retailer early in the process that a package is coming back. “Visibility of inbound products is critical,” Maddock says. And it relieves the merchant of the need to staff return centers for peak periods and deal with all the detritus that a return center creates. “When we explain this to retailers, they always say, ‘You mean I won’t have to cut up cardboard boxes, hand them off to someone and pay for their disposition?’” says Susan Russell, FedEx’s director of domestic product marketing.
The FedEx Consolidated Returns Service builds on a returns product that FedEx has offered for seven years. What’s new is the consolidation of returns and the customer convenience of being able to bring a returned product to a FedEx office without having to package and label it. “Anyone who’s ever had to deal with a return will know how much easier this is,” Russell says.
A new way to save
To use the Consolidated Returns Service, retailers can integrate as much or as little as they want of their order processing systems into the FedEx system. For instance, they can install as little as the system that generates the return authorization code, which adds a prefix to their order number for FedEx routing and a suffix that carries disposition instructions, or they can link up their entire order processing system so they’ll know when credits need to be issued.
Depending on the complexity of systems and the size of the retailer, implementation can take from as short as a few days to as long as a couple of months, Maddock says. Retailers also can implement the system on an incremental basis, starting with the simplest processes and adding as they gain experience.
With retailers’ growing emphasis on profitability and cost-cutting, FedEx expects robust demand for its new service. “This is an emerging area where our customers can look to save a lot of money from something they couldn’t have saved money on in the past,” Maddock says.