Ready for returns

With the holidays just around the corner, smart retailers are fine-tuning how they’ll process unwanted gifts come Dec. 26.

By John N. Frank

Fall may be the time when people are thinking about leaf raking and college football, but for e-retailers it's the time to implement plans for how they'll handle the onslaught of post-holiday returns. Returns typically vary from 10% to as much as 40% of holiday sales volume, depending on the merchandise category, retail experts say.

For Internet-only retailers, the challenge is to make the online return process as painless as possible for customers while minimizing the time required to get returned items into inventory so they can be resold. Some retailers, largely those that have stores, meanwhile, are trying to turn the returns process into more of a sales opportunity by encouraging shoppers to return items bought online in stores. Key decisions merchants must make now include whether to lengthen traditional return periods, how they'll handle the increased flow of returns, and how they'll manage returns initiated by gift recipients who may or may not have packing slips and order numbers, experts agree.

Multichannel apparel retailer The Limited began gearing up for returns in early October, adding seasonal staff, educating both in-store and call center staff about the retailer's return policy and communicating that policy clearly to customers, says Jason Acevedo, director of e-commerce operations.

The Limited does not lengthen its 60-day return policy during the holidays. "We message our return policy on the footer of our web site, which can be found on every page except checkout and in our customer service section," says Acevedo. "In checkout, we provide a link to the policy. When you place an order online we reference the policy in the order confirmation with a link to the full policy. Our packing slips also include the policy links and also include a return-by date."

Extending the return period during the holidays can provide some added peace of mind for gift buyers, and it might not actually spell many more late returns for retailers, says Lisa Gomez, principal in the retail and distribution practice at Deloitte Consulting LLP. "Retailers with longer time frames still say they get the bulk of their returns within that 30-day window—more than 60 days is rare. So extending it out, from a customer perspective, makes sense," Gomez says.

Many e-retailers extend return windows so that consumers won't hesitate to buy gifts early. For example, for orders placed from Nov. 15 to Dec. 15, web-only jeweler Blue Nile Inc. will accept returns through Jan. 15, a spokesman says. During the rest of the year, the returns window is 30 days. Blue Nile will start promoting the seasonal change to the policy on BlueNile.com on Nov. 15. To initiate a return or exchange, the gift recipient needs only to provide the e-retailer's customer service team with the original order number.

Ritani, a brand manufacturer and designer of high-end jewelry that sells directly to consumers online at Ritani.com, also extends its typical 30-day return period for online orders during the holidays by 15 to 30 days, depending on product purchased, says Brian Watkins, Ritani president. Ritani plans to promote the extended return window on Ritani.com from Nov. 28 through Dec. 15.

"This shift eases the consumer's anxiety around the purchase timing," Watkins says. Usually about 10% of Ritani.com orders placed around the holidays are returned, which Watkins says is in line with industry expectations for high-end jewelry.

Since October 2012, Ritani has also offered a return option rarely available from companies that don't operate their own physical stores—in-store returns. Ritani.com works with 125 independent jewelry stores across the country to accept Ritani.com product returns on the manufacturer's behalf.

Watkins says offering an in-store return option makes returns easier on shoppers and keeps them engaged with the Ritani brand, even if that happens at a local jewelry store. "If a customer comes into a jeweler with a return, he is a very qualified lead. We want our jewelers to work with the customer to ensure a positive sales experience."

Watkins says he doesn't have data on how many of those customers go on to purchase at the participating jewelry shops. The stores use fully insured prepaid FedEx envelopes to ship items back to Ritani.com. "We want to get the product back to us as fast as possible to release any funds back to consumers and ensure we are leveraging our inventory," Watkins says.

Getting returned inventory back into circulation is something retailers endeavor to do quickly. Delta Apparel, which sells T-shirts and accessories through sites including SaltLife.com and JunkFoodClothing.com, shifts its workforce around and hires seasonal workers to make sure it gets returned goods back into inventory within 24 hours of receiving them, says David Workman, e-commerce operations manager.

The Limited works with an outside vendor, Newgistics Inc., to handle its return processing, Acevedo says. It generally takes about four days to receive returned items from consumers. Once in hand, it typically takes one business day for items to be returned to inventory.

Most items bought from The Limited online can be returned in-store, although the retailer won't be doing anything to encourage cross-channel returns this holiday season. Currently records for online and store inventories are largely maintained separately, but Acevedo says the retail chain is working to improve that system so it can better serve customers across channels. Items that are returned in stores, assuming they're not damaged or not items usually unavailable in a given store, are put into store inventory immediately. 46% of the retail chains ranked in the Internet Retailer 2013 Top 500 Guide offer in-store returns of items purchased online.

Putting in-store returns back on the shelf as soon as possible is an ideal for multichannel retailers. For The Limited, an item not in stock could quickly go out of season or out of fashion, Acevedo says. "From a cost perspective, the difference [between an in-store and a shipped back return] is an incremental $6 to $10 per return sent back to us at our return center, [but] that does not include the opportunity cost of lost sales that could have been had if we had the item in inventory to sell."

Online retailers today typically publish return policies online and on post-order shipping confirmations, says Lauren Freedman, president of The E-tailing Group Inc., an e-commerce consultancy. "But you will also see retailers like Nordstrom and Zappos reinforce their easy-and-often free shipping and returns policies throughout the site, in particular via the shopping cart," she says. "There are some companies that are so customer-centric that they're always reinforcing that."

Web-only e-retailer eBags Inc. puts gift recipients in the driver's seat to initiate returns. Consumers click a Return A Gift button on the web page that details eBags' return policy. They provide the first and last name of the person who gave them the gift, enter their own name, e-mail, contact phone number, and the brand and model number they want to return, and press the Submit button. EBags built the program that matches order information with the gift buyer's name in-house, says Peter Cobb, co-founder and senior vice president of marketing. EBags immediately e-mails a prepaid mailing label to the gift recipient. Once eBags receives the return, it issues a gift certificate for the original purchase price, less the initial shipping fee.

"Customers have lots of options, so we want to make returns easy and friction-free," Cobb says. Interestingly, eBags' return rate drops nearly 20% during the holiday season, from a 10.8% average most of the year to 8.8% around the holidays.

Cobb believes there are several reasons for the drop, including consumers recognizing that they got good deals on promotional days like Black Friday and Cyber Monday. He says eBags also sells a lot of luggage and accessories during the holiday season, which have lower return rates than products like handbags. EBags doesn't change its 60-day return window around the holidays, but Cobb says it endeavors to do whatever it can to accommodate customers so long as an item is unused.

Web-only specialty retailer AccessoryGeeks.com, which sells cell phone and electronics accessories, takes a similar approach, says vice president Karen Kang. "Our policy is 30 days, however, customer satisfaction is our No. 1 priority. We accommodate the customer's needs as much as possible," she says. Kang says AccessoryGeeks.com sees about a 15% increase in returns and exchanges in January. Consumers who get a gift they don't want can exchange it or return it for credit on a future purchase. "We feel that every experience must turn even a disgruntled customer into a happy customer who will remember us," she says.

The holidays bring joy to many, and with their improved returns processes retailers today aim to extend that goodwill even to unwanted holiday gifts.

John N. Frank is a freelance writer based in Evanston, Ill.


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