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Gaining return on returns: A retail imperative

BY CSA STAFF

By Ramsey Mansour, [email protected]

The retail industry has undergone significant changes over the past 18 months, some of which were temporary and many that are here to stay. One trend that continues to grow and evolve is the popularity of online and mobile shopping. Consumer empowerment enabled by technology has reached new levels and the retail industry will likely transform as a result. Last year, online sales grew to $32 billion with 60% of consumers purchasing their gifts online, according to comScore.

Along with those robust sales, there are returns. According to Consumer Reports, nearly 20% of shoppers plan to return at least one gift. Those retailers that make the best of incoming shoppers and handle customers with care can drive new revenue opportunities and build brand loyalty.

A study by Forrester Research showed that more than 80% of consumers are more loyal to online retailers with a generous returns policy. But if the returns process is a hassle, 73% of consumers said they are less likely to buy from that retailer in the future.

While most retailers understand that a convenient returns process is an asset in creating a loyal customer base and driving repeat sales, many are focused on cost. With oil prices rising, and drivers paying more at the pump, it’s understandable that consumers are watching their wallets. That’s forcing retailers to find more efficient and cost-effective supply chains. The good news is that retailers can offer a competitive returns policy while protecting – and possibly even growing – the bottom line.

The key to keeping costs in check and gaining a real return on the returns process is to assess the supply chain as a whole and identify opportunities for greater efficiency.

Here are some key tips for retailers to gain a competitive advantage:

Think Big Picture: Examine the entire supply chain to identify savings opportunities. Third parties such as UPS can work with retailers to perform a comprehensive supply chain analysis and map out the ideal returns strategy.

Location, Location, Location: Costs can creep into the returns process when facilities are located too far from customers. Many retailers benefit from a central distribution location or a model that includes multiple distribution facilities to cut down on shipping costs. This strategy also leads to faster customer service.

Keep It Simple: Customer convenience is paramount. Options such as pre-printed return labels on outgoing shipments and web-based returns simplify the process by allowing customers to instantly access and print return labels with the click of a mouse.

Track it Forward – and Back: Visibility is also critical. Customers want to know where their packages are at all times. Smart retailers should invest in technologies that allow customers to easily make purchases and track packages until delivery.

Third-Party Logistics: Partnering with a third-party logistic provider can have a tremendous impact on speed, flexibility and cost. Corporations such as UPS have extensive networks of global distribution facilities. And for many Internet retailers, UPS offers returns processing in the same facility, further driving down costs.

Knowing where to focus when it comes to returns gives retailers an advantage in terms of improving the customer experience while keeping costs down and carving out a marketplace advantage. That’s gaining a real return on returns.

Ramsey Mansour is the director of retail and consumer goods marketing at the UPS headquarters in Atlanta. He can be reached at [email protected].

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Stop & Shop “shores” up N.J. acquisition

BY CSA STAFF

FAIRFIELD, Conn. — The Stop & Shop Supermarket Company announced that it has finalized its acquisition of five New Jersey Shore-area Foodtown supermarkets previously owned by Norkus Enterprises Inc. The transaction involves stores in Freehold Township, Manalapan, Neptune City, Point Pleasant Beach and Long Branch. Stop &Shop currently operates 10 stores in Monmouth and Ocean counties.

"Stop & Shop is always looking for opportunities and convenient locations to better serve our customers," said Ron Onorato, Division President of Stop & Shop’s NY metro division. "We are very excited to have the opportunity to expand our presence in Monmouth and Ocean Counties. We look forward to providing our customers in these areas the superior value and quality they have come to expect from Stop & Shop."

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Target tops earnings view, but tempers profit outlook

BY CSA STAFF

MINNEAPOLIS — First-quarter sales at Target increased 2.8% to $15.6 billion, and same-store sales increased 2% the company reported. The modest sales growth translated into earnings per share that advance 9.8% to 99 cents, four cent better than analysts’ consensus estimate of 95 cents, and net income that increased 2.7% to $689 million. Share repurchase activity contributed to the earnings per share growth as Target spent $819 million during the first quarter to buy back 15.4 million shares at an average price of $53.32.

“Our first quarter financial performance was the result of stronger-than-expect profitability in our credit card segment, which offset the impact of weaker-than-expected sales in our retail segment,” said Gregg Steinhafel, Target’s chairman, president and CEO.

Operating profits for the retail segment declined 4.2% to slightly more than $1 billion during the quarter as the company’s PFresh remodeling efforts and 5% rewards program pressured expenses and caused gross margins to contract to 30.4% compared with 31.3%.

Target expects to maintain its breakneck pace of store remodeling activity during the remainder of the year, with 300 additional units slated for remodel before October, adding to the 550 units that have already been converted to the PFresh concept.

In contrast to the performance of the retail business, the credit card segment produced unusually strong operating profits, which grew by 75% to $194 million as bad debt expense was virtually non-existent at $12 million compared to $197 million. Following the launch of the 5% rewards program, Target’s RED card products now account for 7.6% of the company’s sales.

Looking forward, Target CFO Doug Scovanner said analysts’ current consensus estimate of $1 for the second quarter seems potentially achievable, but above the midpoint of a range of likely outcomes as is the case with analysts’ full year estimate of $4.23.

As for comps, Scovanner said, “We remain quite likely to achieve 4% to 5 % same-store sales performance in the fall and I believe we are quite likely to experience better same-store sales growth in the second quarter than we did in the first quarter.”

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