How Retailers Can Reduce Returns in 6 Steps

After years of considering product returns “the cost of doing business,” retailers are realizing the light at the end of the tunnel is a train—and it’s not slowing down. As eCommerce sales have skyrocketed in the last decade, so too have returns, with some product categories spiking up to a 30% return rate or more. While the holidays may seem far behind in the rearview mirror, retailers are contending with a barrage of holiday returns. In fact, real estate and investment firm CBRE estimates that returns for goods purchased online between Nov. 1-Dec. 31 2019 could reach up to $41.60 billion.

In the age where retail bankruptcies are daily news, returns reduction presents a significant opportunity for retailers to enhance their bottom lines. Our estimates show that every $1 M reduction in returns adds $0.5 M to the bottom line—Nothing to turn your nose at if you’re trying to recoup costs anywhere you can. We have discussed at length the need for retail organizations to designate an executive responsible for the revenue leakage due to returns, but once that person is designated, what actions need to be taken to make meaningful returns reduction?

How to Reduce Returns

1. Monitor Product Performance on a Daily, Weekly, and Seasonal Level

When it comes to reducing returns, a post-mortem just isn’t going to cut it. Products, particularly products that may have made it past QC checks by just the skin of their teeth, need to be monitored consistently in order to identify return rate spikes. Monitoring performance takes more than reviewing sales and returns data—Customer service calls and online reviews of your products also serve the important purpose of providing meaningful feedback on the purchase experience and product quality.

2. Identify the Products with Returns Problems

Charles Kettering, the famed inventor and head of research for GM, said: “a problem well-stated is half-solved.” If you’re looking to reduce returns, you can’t take action without fully understanding not only the problem products (or problem customers) but the root cause of the returns. Is it a quality issue, or a delivery one? These are just two examples of many reasons people return products.

3. Comprehensive Analysis

Part of identifying the returns problem areas is analysis. All returns-relevant data should be collected and analyzed in one central repository. This will ensure a single version of the truth. Returns-relevant data can come from the following sources: PIM, PLM, Merch, Planning, OMS, WMS, CRM, and even Voice of the Customer data from online reviews and call center transcriptions.

4. Take Corrective Action

Once you’ve identified the problem and the root cause, then you can take corrective action to reduce returns, product by product, category by category.

Incorrectly shipped product? Do a quality audit in the DC to ensure the correct items are being packed and shipped.

Customers say the product runs small? Put a note on the website that indicates to the customer they should size-up.

Quality issues? Stop selling the product until you can perform a QC check on the product to ensure there aren’t quality issues across the board.

5. Collaborate Across Silos

A successful Returns Reduction team can’t work in a silo. Each functional area within the retail enterprise has some ownership and responsibility for returns. A task force may include employees from Merchandising, Operations, Fulfillment, Marketing, Quality, and others to ensure corrective action is taken and the results are captured.

6. Measure Success

Once you’ve taken corrective action, record it and monitor the change in return rates to ensure a positive downward trend.

There you have it. The 6 steps necessary for returns reduction, so you can start building the initiative in your own organization. These steps may sound simple enough, but we know first-hand that returns reduction by brute force is a labor-intensive endeavor. That’s why we built Chief Returns Officer® with each of these steps in mind. With Chief Returns Officer, all 6 steps are automated and the power of AI ensures ongoing success. The only thing Chief Returns Officer doesn’t do is take the corrective action for you.

Newmine has also launched a Product Return Council with RVCF to ensure retailers are supported through the process of instituting returns reduction initiatives in their organizations. To learn more, read the press release here.

Similar posts

Perspectives and thought leadership from retail visionaries. 

Keep informed on retail industry and product returns insights so you can recover revenue and enhance your customer experience.