Returns Take the Lead in 2012

Is Your Company in the Race?

By Ken Burkeen, pr@ups.com

With the rise in online sales in 2011 – close to $60 billion – more people returned those gifts they couldn’t try on or touch before Christmas. Just as our signature brown trucks delivered all those holiday gifts, we returned more than two million packages back to retailers during the first week in January. On our largest shipping day for returns, Jan. 3, we transported a record 552,000 packages – nearly 8% more than last year.

For a significant return on returns, retailers must provide a hassle-free process, a positive customer experience and eliminate inessential costs. The quiet time after the holidays is an opportunity to evaluate returns and improve operations in 2012 and beyond.

Some key tips for retailers to consider:

Provide an exceptional customer experience: It’s the best way to win and retain the hearts of consumers. A smooth returns policy and excellent customer service can encourage shoppers to come back when they’re in the buying mood. Among the factors retailers should consider:

o    Advanced visibility technologies can go beyond letting retailers and customers know where their shipments are to do things such as actually credit a customer’s account as soon as the item is shown in transit within the carrier’s network. 

o    More retailers are now offering free shipping on returns. Zappos has been an industry leader for years with a free 365-day return policy, and this year, Nordstrom introduced free return shipping for online orders.

o    The returns process starts at home, where the customer can print a mailing label and take the package to a local shipping location or even leave it in their mailbox – making it simple and easy.

Consider how returns flow: Retailers should also consider where distribution centers are located and how they are utilized. Costs and service delays can creep into the returns process when facilities are located too far from customers. Some retailers benefit from a central distribution location; others best utilize multiple facilities. Determining the right location starts with a supply chain analysis. However, there are guidelines that can be considered, depending on the type of retailer and individualized supply chain needs:

o    Leveraging a single, centrally located distribution model can be ideal for retailers who have a need to store a significant quantity of products and want to provide wide availability for a broad selection of items. Retailers can also take late orders and still ship the same day.

o    Multiple distribution locations can increase inventory while offering lower shipping costs and faster time in transit. High-volume shippers often use this inventory placement strategy. The rule is to place high-volume items in multiple locations close to customers and slower moving products in a central location. E-tailers should also consider local tax laws when choosing a location.

o    Another option many online retailers and multichannel retailers deploy is to ship directly from their suppliers – often called “drop shipping.” This strategy requires precise coordination with suppliers. Returns can go directly back to the supplier as well, eliminating the need for the retailer to process the items or shift ownership of the inventory.

o    For brick-and-mortar retailers, a distribution center bypass strategy can be used to move merchandise directly to the stores. This also requires careful coordination with suppliers and transportation providers, but can yield significant savings if executed well. Returns of these items can be managed by a third party or moved directly to the supplier’s location.

Look inside the supply chain for cost savings opportunities: Examining the supply chain is one of the best ways to identify opportunities to reduce costs and improve service levels. Strategies will vary depending on business models, product types and customer segmentation. Some common areas where retailers often find opportunities for improvements and potential cost savings include:

o    Evaluate inventory management practices – optimizing the quantity and location of key items in inventory prior to peak shipping times has the potential to improve both cost and the customer experience.

o    If you have a retail storefront, consider offering in-store returns for online purchases – it brings a valuable existing customer into your store.

o    Examine how packages are prepared and sorted for outbound shipments to reduce labor and warehouse costs. Also, by consolidating high volume packages into more efficient transport loads, retailers can reduce time in transit.

o    Select the most cost-efficient transport mode to meet the service commitment.

By mastering returns operations, retailers can create a competitive advantage while improving customer satisfaction and bottom line sales.

Ken Burkeen is marketing director, retail & consumer products division, UPS. He can be reached at pr@ups.com.

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