Article Written By | Mark Lightbody, Partner
This is the third in a three-part series on Funding Growth: Mining for Gold Behind Your Buy Button. A quick recap on Part I and II: the Newmine team spends hundreds of hours working with retailers and brands each week. Our clients face real challenges and we are here to help our clients based on our knowledge and shared experiences. As discussed, we have developed this blog series with the intent to help our clients look within their own organization to find solutions to unlock substantial funding sources.
In Part I of this blog series we talked about looking inside your Outbound Shipping Costs. In Part II we focused on Order Profiling. In Part III we will take a deep dive into Customer Returns and Returns Management.
Returns Management and Reduction is perhaps the most challenging of all the areas we have recommended to look at as it is the most complicated area. We say this because returns have become an acceptable cost of doing business for online retailers. With the focus on top line growth, returns management is pushed to the back seat.
For apparel and footwear, online returns rates range from 20-35%+, a reduction of 1-2% will have a dramatic impact on the bottom line.
For one $400MM online retailer our team worked with, returns had risen nearly 5% above the norm which got the attention of the CEO. To get to the bottom of this sudden rise it required the creation of a cross-functional business team who met regularly, and review returns data that was collected by brute force. Although this was time and labor intensive, the results were impressive: A nearly 18% reduction in the returns rate, which increased EBITDA of $2.5MM. Moreover, with the new discipline and processes in place they sustained that return rate year over year.
To better illustrate the impact of reducing customer returns let’s look at some of the key drivers: A 200-million-dollar business with an overall return rate of 25%, and with a margin of 50%. By reducing their return rate by only 1% drives a combination of realized margin and operating cost savings of over 1MM per year.
So, what did we learn:
- Take a closer look into your customer returns.
NEWMINE HAS DEVELOPED A SOLUTION:
Newmine, LLC. announces the launch of their revolutionary cloud-based software to reduce customer return rates. Chief Returns Officer™ enables retailers and consumer brands to take omni-channel commerce profitability to the next level.
With ever increasing pressure to grow top-line revenue, returns have traditionally been accepted as a cost of doing business. However, in today’s highly competitive market, customers expect Fast, Free and Easy returns. This has driven customer return rates even higher, placing increasing pressure on the bottom-line. For a typical specialty retailer this means that every $1M in returns will reduce EBITDA by at least $500K.
Chief Returns Officer™ is like adding a world-class returns expert without the burden of adding additional staff. The software leverages data from multiple sources, as well as data science and AI principles to determine the root-cause of returns in near real-time. Actionable recommendations are then supported via a collaborative cross-functional workflow. This approach allows retailers to solve problems during the selling season, which in turn guards against revenue leak.
While returns will never be eliminated, Chief Returns Officer ™ allows retailers to take informed and timely actions to reduce the return rate and add significantly to their bottom line. Chief Returns Officer ™ is currently in place and producing actionable insights for two major retailers.
“We recognize that offering fast, free and easy returns is important to the success of retail brands,” said Navjit Bhasin, founder and CEO of Newmine. “But that doesn’t mean that returns should be left unmanaged and unchecked. Reducing consumer returns can potentially add millions to the bottom line. This can provide funding for growth initiatives, improve company valuation, and even avoid bankruptcy.”
Learn more here www.chiefreturnsofficer.com
We hope you were able to take away some valuable information from this series. Please take a look within your own organization to find YOUR GOLD!
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