Edition 59
Best Practices for Your Returns Management Process: Achieve Business Objectives and Improve the Customer Experience
by Cayce Roy, Executive Vice-President and President of Retail Supply Chai, Liquidity Services Inc

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Introduction

With holiday returns continuing to impact the market, both retailers and consumer goods manufacturers need a preferred method to manage returns in a seamless manner which support the customer experience, increase omni-channel sales growth, decrease costs, and improve brand perception. Historically, returns and overstock have been viewed as a cost of business, rather than a source of innovation and revenue. Forrester released recent numbers projecting U.S. e-commerce to account for 10 percent of all U.S. retail sales by 2017, up from 8 percent in 2012. With online sales growth outpacing that of brick-and-mortar stores and the higher return rate coupled with online sales, retailers and manufacturers must be prepared for the returned flow of goods.

Given this growth and the significant impact of consumer perception as it relates to product purchases and retailer store/site visits, this area of the business can no longer be dismissed. Through implementation of returns management process best practices, retailers and manufacturers can focus on their core business – providing a great experience for their customers and manufacturing products to sell to consumers (respectively). The three primary components to a streamlined returns management process to achieve these aims include the following: streamlining RTV agreements, centralizing your returns process, and maximizing sustainability and embracing the new “R” Cycle.

Streamlining Return-to-Vendor (RTV) Agreements

With the significant financial and operational impact of returned product, it is more important than ever to create a seamless process for managing both retail and manufacturer returns. Returns are an inevitable part of retailer-vendor relationships, and whether returns are sent directly to manufacturers or processed through stores; Return-to-Vendor (RTV) agreements are a key component to ensuring that both parties have a common set of goals around the returned inventory. Unfortunately, many agreements can unintentionally create strain in the vendor/retailer relationship and diminish any potential increased recovery possibility for returned or overstock merchandise. An effective RTV agreement will optimize the reverse supply chain, reducing touches – in both transit and handling - on the returned product. This effectively reduces costs for returns for all parties, providing more time for employees to focus on customers and “A” stock product.



Whether or not your strategy accounts for it, there are many opportunities for customers to interact with your brand. Without your knowledge, there might be countless non-approved vendors selling branded merchandise, which can negatively impact vendor/retailer relationships as well as customer perception. Incorporating a streamlined RTV agreement with a trusted provider can create greater visibility into how and where your product goes and who is interacting with that product. By making a trusted expert central to the RTV agreement, your organizations can mutually leverage capabilities in the secondary market, spurring growth and providing top-notch alternatives for consumers. Putting your best foot forward in the secondary market will protect your brand(s) while enhancing both retailer and consumer brand reputations with customers in both the primary and secondary markets.

Centralizing Your Returns Process

Similar to the results of misaligned RTV agreements, the returns management process is diminished by directing product to a local liquidator or tapping store employees to manage returns. While a localized returns management process - whether through a vendor or managed in-store through employee time -seems to be easier, it carries hidden costs. A decentralized process limits potential recovery for products, and you lose out on opportunities for additional revenue. Centralizing your process through a strategic partner, this “B” stock product can be properly marketed on the appropriate channels, supporting your omni-channel sales growth and optimizing each product with greater control over how your brand is perceived.



An improperly executed returns program can be disastrous. For instance, if your customer’s private data turned up on a returned product in the secondary market, you have a big problem on your hands. Most local vendors do not have the resources and tools to provide de-labeling, data wiping, refurbishment, and other services. Your employees are busy taking care of customers or managing product development and manufacturing, and may not have sufficient time to take the care needed to keep you compliant on non-core business activities. By ensuring the proper protocols are being followed by your chosen vendor, you can earn greater trust with your customers and as a result, increase brand loyalty. A truly centralized process will provide you with full transparency and indicate whether compliance policies and regulations are being adhered. This can include data wiping on electronics to protect consumer data on consumer electronics, a product category more often returned over other products. Through a centralized process, you can leave this important but secondary activity to experts who know the market.

Maximizing Sustainability and Embracing the New “R” Cycle

Large organizations cannot afford to have their brand and image tarnished by news of negative environmental impact in areas of their business where they can exercise control. RTV agreements can be restructured to ensure that product is kept out of landfills, and through a centralized return process, you receive the benefit of additional branding support. However, one of the more overlooked benefits is the positive impact to your triple bottom line – people, planet, and profit.

Returned and overstock inventory can easily become useful product for a small business or another customer searching for it in the secondary market. Through an effective returns management process, you can defer these products from ending up in a landfill, and win with your customers. It is also critical to ensure that you have sustainability programs in place to formulate a true sustainability success story that promotes the company’s green initiatives. Returned products effectively re-used and deferred from landfills can add up to a big sustainability impact while saving costs in the process and supporting the company’s brand.

Many manufacturers and retailers are quick to jump on the e-waste and recycling bandwagon, not realizing that utilization is more sustainable. The new “R” cycle can help you to maximize revenue and be sustainable, while protecting your brand:

1. Re-use - The first step in the new “R” cycle is to determine if an item can be re-used.
2. Re-furbish - Refurbishing an item rather than throwing it out or recycling it, saves carbon emissions.
3. Re-commerce – After an item is marked for re-use and has gone through proper refurbishment, the product can be re-commerced through an omni-channel strategy.
4. Re-distribute – The item is then sold to a new buyer to go back into the supply chain. If you work with a reputable partner, it should be a transparent process. For example, a returned, refurbished tablet can become a valuable tool for a small business to conduct offsite operation, and by doing so, everyone benefits – including Planet Earth.
5. Re-cycle – If the item cannot be re-used, then you recycle it, ensuring that e-waste is disposed of properly.

CONCLUSION

A streamlined returns management process can be a key to innovation in an industry largely driven by consumer demands. Organizations cannot afford to be less flexible with return policies, or they risk losing customers. In addition, changing consumer trends and quicker demand for product enhancements have reduced the shelf life for many products – from consumer electronics to sportswear. Ultimately, retailers and manufacturers can no longer afford to ignore their returns process and name it a profit loss and call it a day.

The thoughtful transformation of this area of business can be exercised through streamlining RTV agreements, centralizing the returns process, and maximizing sustainability by embracing the “R” cycle. This approach will yield additional recovery value, while providing enhanced branding in key markets, and expanding sustainability leadership through measureable initiatives. An effective returns program will produce these benefits, while allowing your employees to spend their time on core business activities and driving value for your brand with your customers.
RLM
Cayce Roy is president of the retail supply chain group at Liquidity Services, an online marketplace and integrated services provider for surplus goods. Cayce can be reached at cayce.roy@liquidityservicesinc.com.

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