September 30, 2004, 12:00 AM

The Well-Traveled Package

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The process can pay off on a number of fronts. For one, says Dampier, Newgistics clients have seen increases in customer retention on the order of from 1% to 3%, as determined by A/B tests against a control group. "Customers become more confident when making a purchase that returns will be smooth sailing," he says. "That has played out as increasing repurchase." Among several retailer clients, implementing SmartLabel has resulted in cost savings at the call center, with calls involving questions about the returns process reduced by about 35%.

In addition to such operational savings, Dampier says the program generates revenue for most retailer clients. Newgistics charges a set fee for every package it handles for a retailer client, and retailers typically mark that up when passing return shipping fees on to the customer.

Neiman Marcus Group Inc.`s direct-to-consumer business has trimmed a day and a half from its average time to process returns since going with returns services from Newgistics last year. "The packages come back to us very quickly," says Greg Shields, vice president of operations at Neiman Marcus Direct. "Because Newgistics extracts the packages (from regional shipping centers) and consolidates them, the average time it takes from the time a package is inducted into their system is about 3.7 days."

Of the items that are eligible for return via Newgistics` program, customers are choosing to use the service about 90% of the time, he adds. Some items can`t be shipped under the program because of size and weight restrictions. In addition to ratings from customers who`ve used the service that are 90% favorable, Neiman Marcus Direct gets extra mileage from the program by using it to get returned goods back out into the shopping stream sooner.

"Because we know a lot about the package as it`s coming back, it helps us speed returns through the system," Shields says. "If the product is in good shape, we can actually pick it off the dock and ship it back out again." Given the short and seasonal nature of the product lifecycle for gifts and apparel, that helps Neiman maximize sell-through on those items, he adds. Using SmartLabel also has let Neiman Marcus eliminate call tags, a service for preferred customers that arranged for a shipper to pick up the return package at the customer`s house. That had been costing Neiman about $5 per call, says Shields.

While Neiman Marcus currently uses Newgistics service only in its direct to consumer business, which also includes the Horchow catalog and Chef`s Kitchen brands, the company is about to test the program in its Bergdorf Goodman store in New York City, which gets many of its returns through the mail rather than in-store because many store customers are visiting from out of town. The test will include a Newgistics label on any package shipped out to a customer who purchased it in-store, as well as make Newgistics labels available in-store to customers.

Getting a firm grasp on the returns process-by internal improvements or an outsourced solution-is a win for retailers, though some have yet to see that. One of the biggest objections Newgistics encounters when talking to prospective clients is that while some will even go as far as to admit they handle the returns poorly, they continue to assign it a low priority if they don`t understand its larger impact, Dampier says.

The other major objection? Some retailers still believe that making returns easier will only increase their volume. Yet among four retailer clients who have tested that premise in A/B tests, returns by customers given the option to use SmartLabel were either the same as or less than those from the control group not offered that option.

"Sometimes, the idea is that if a retailer makes returns easier, it will have more customers returning items," says Dampier. "That doesn`t make sense, because the alternative is having a customer who doesn`t return the item, but is unhappy. Why would you want that?"

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