In a recent study conducted by consulting and outsourcing firm Accenture, the product return rate for consumer electronics averaged between 11 and 12 percent during 2007. The cost to manage that returned merchandise reached $13.8 billion.
But 95 percent of the merchandise returned had nothing wrong with it. Looking at the possible reasons for these types of returns and how those causes can be remedied can help retailers avoid a dip in the bottom line.
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Market-right features
Many times such returns are the result of a retailer carrying a product that doesn't have the features customers demand. They may still buy it, but the end result will typically be a return.
The best way to find out what the customers want is to ask them. Salespeople will also know well what customers are asking for that a store isn't carrying. Paying attention to the responses and acting on them will help minimize returned merchandise. Keeping tabs on the competition can also be useful.
"Shop your competition frequently to see what their hot sellers are," suggests Tom Hebrock, vice president of retail services at Stuart and Associates in Brentwood, Tenn.
Items that fly off the shelf at one retailer but aren't even on the shelves at another are ones that should be added to the inventory.
Educate sales personnel
Retail employees have a tendency to sell products customers don't need or want because they don't know any better. Without the proper training and product education, sales associates don't know how to qualify their customers. Uneducated salespeople create a revolving door of products — ones that were contributing to sales numbers may soon be back on the shelves.
Even when employees aren't paid handsomely or on commission, they still want to be challenged and led, says Rusty Hurley, chief operating officer for Optimal Advantage in Eden Prairie, Minn. "Just be sure the training they get is right for that particular employee," says Hurley. "Giving a teenager a thirty-page manual to read is probably not the right thing to do."
Knowing who the employees are, where they come from, what kind of time they're given for on-the-job training and what their educational background is are important factors in designing effective training solutions.
Recognizing sales associates who have completed a training or certification also goes a long way. Try announcing their names and what they have accomplished, holding contests for the employee with the least returns in a month, honoring them with a plaque bearing their picture or giving them a reserved parking place. Recognition doesn't have to be costly.
Informative displays
"With tight payrolls and a large turnover of associates, displays are more important than ever before," says Hebrock. "This is what the customer relies on if they can't get employee assistance in the store."
Displays need to have consistent information for one type of product. For example, LCD TVs should list all the same features for each model — if one display sign includes the resolution of the TV screen, then they all should. The sign also needs to include accessories that are needed but not included so the customer doesn't get home expecting what's not there.
Informative displays will also help store personnel communicate the benefits and features of the products they are selling. While it would be nice for associates to memorize every feature of every product, the expectation is unrealistic, and detailed displays will assist them in selling.
After the sale
According to Hurley, most customers dread returning or exchanging a product, so a helpline combined with a well-organized Web site that can assist the customer in resolving product issues will help prevent that return trip to the store.
It's also a very good idea to have sales associates make a follow-up call to see how the product is working. An added benefit of this tactic is that it helps a retailer establish a relationship with its customers.
Hebrock also recommends free delivery, installation or set-up for the more expensive items you sell.
"Understanding what causes returns is important, not only in satisfying the customer with a current purchase, but so lessons can be learned about changes that may be needed to future products and service iterations," says Hurley.
Encourage customer reviews
When Petco, the pet-supply chain, engaged BazaarVoice to help facilitate customer reviews on its Web site, the stores' return rate immediately went down 20 percent. Petco continues to use it three years later — a tribute to the success of the program. When the chain offered a $100 gift certificate in a sweepstakes open only to customers who had posted reviews, it realized an 800 percent increase in customer reviews.
"More customer reviews drive higher sales, lower product returns and more search-engine traffic," says Sam Decker, chief management officer for BazaarVoice in Austin, Tex. "Getting your customers interactively involved in your Web site benefits everyone involved."
The more reviews a product gets, the better. A product with 50 reviews has a 135 percent lower return rate than products with fewer than five reviews.
"This new data is another sign that Ratings & Reviews (the BazaarVoice system) are providing customers with the information they need to make the right purchasing decisions," says John Lazarchic, vice president of eCommerce at Petco.
