March 31, 2010, 12:00 AM

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That kind of automation is already helping to manage inventory at online retailer Inc., which developed in-house a system that automatically updates the retailer’s inventory and accounting systems when items are returned, says Jim Keller, senior vice president for marketing and business development.

“That allows us to tie the return directly to the initial order, and it expedites the return process when a package comes back into our facilities,” he says. “The online return processing ties into our inventory and financial systems, so when a return comes in it’s easier for the folks in our warehouse, for example, to pull up the exact customer order related to the return to make sure that what we’re expecting to be in the returned box is in the box.”

Outsourcing options

Other retailers opt for outsourced returns management systems offered by companies such as SkuTouch Solutions, Shipwire Inc. and Inmar Inc., which offer a range of online returns processing and warehousing services.

SkuTouch, for example, provides in a software-as-a-service environment a customer self-service returns processing system designed to capture the who, what, when, where and why behind package returns without the cost of contact center agents taking that information, says Doug Obershaw, director of business development. Retailers can configure the system with business rules that grant customers a return authorization if they’re within the retailer’s permissible return period and if they’re sending back products the retailer is willing to accept.

Seat Glovers, an online retailer that sells waterproof seat covers for off-road vehicles like Jeep Wranglers, chooses to take a more hands-on approach. It uses a system from Shipwire that consumers could use in a self-service mode, though Seat Glovers prefers to have customers call in and have company agents key in the return information, says Marc Blaiwes, owner/operator of Seat Glovers Enterprises Inc.

Blaiwes says he prefers to maintain direct contact with customers to provide personal service and have the opportunity to see if a customer will opt for a product exchange instead of a return and a refund.

Outsourced warehouse

Seat Glovers also uses Shipwire’s warehouse facilities for receiving returned merchandise as well as for shipping initial orders, an option Blaiwes says has produced a good return on investment compared to when Seat Glovers operated its own warehouse.

For retailers that ship initial orders from their own facilities, using an outsourced warehouse provider for returns helps to keep their fulfillment centers free of unwanted merchandise.

“Most retailers who outsource to us say they don’t like keeping all returned items in their distribution centers because they can’t plan for the returned volumes that fluctuate up and down,” says Sharon Joyner-Payne, vice president of marketing for Inmar, which operates 33 returns management centers in the U.S. and Canada. “This allows them to free up space in their own warehouses, and have us send only good stock back to their facilities.”

Inmar’s retailer clients provide their customers with return shipping labels for shipping services companies including UPS, FedEx and Newgistics that send returned packages to one of Inmar’s facilities. Inmar works with its retailer clients to set business rules on how to process returns once they’re received by Inmar-for example, shipping undamaged and unopened items back to a retailer’s distribution center, and shipping opened merchandise to liquidators.

Investment returns

For retailers that choose to deploy their own complete fulfillment and returns processing systems and distribution centers, the investment can be large but worth it, says Adkins at Zappos.

Zappos has invested heavily in modern warehousing facilities near a major UPS shipping center in Louisville, Ky. Those facilities ship on average 60,000 items a day, and double that during the holiday season.

It takes several months to a year to train the warehouse workers who process returns. And those are the highest-paid jobs offered to warehouse workers as they require quick, non-stop decisions on whether returned goods satisfy Zappos standards for re-stocking or whether they should be liquidated, Adkins says.

Zappos’ fast growth over the past decade, however, has enabled it to win favorable high-volume shipping terms from UPS to help it afford free returns, he adds. Although Zappos keeps those terms close to its vest, Adkins notes that the retailer’s recent acquisition by online retailing leader has only helped to improve those terms.

A generous returns policy, of course, has supported Zappos’ laser focus on customer service, and its growth curve is a strong testament to the benefits an online retailer can realize when its returns policy suits its brand strategy.

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