Here’s a little quiz to test how well your company is managing the returns problem. As fast as you can, name the person who runs Store Operations, Marketing, Merchandising, Returns Manager (not the Centralized Returns Manager or the Warehouse Manager). If you struggled on the Returns Manager join the group. Most companies don’t have someone who manages the returns process in its entirety. But why not? Returns will be a major factor influencing the profit of your company. Why a returns Manager? For the same reason you have a store manager or District Manager, to manage the company’s assets. Before you dismiss the idea of a returns manager, write down last years $ figure for returns. A returns manager should be able to reduce this number by 20%! Now is it worth it? An effective Returns Manager must interact with the following organizations on a daily basis to successfully manage and reduce returns: Manufacturer/Buyer, Marketing, Finance, Whse., Store Ops/ Field Reps, MIS, Human Resources, Training Dept., Repair Service, Delivery Dept., Replenishment and Loss Prevention.
Companies fail to substantially reduce returns because they let each of the aforementioned groups, do their own thing instead of appointing someone to coordinate efforts and follow the process all the way through. The return problem actually starts before the merchandise is purchased from the manufacturer and continues through to the end when product is returned.
Returns occur during one or a combination of five different phases:
- When the Retailer purchases the product. Do the Manufacturer and retailer develop a return prevention strategy or just talk return caps and penalties? Is returns training part of the vendor product training? Does the vendor bring focus group studies and historical data on sales and returns comparisons?
- The point of sale in the store. What are the expectations of the customer? Why and how did they get these expectations? How often do you train the salespeople on selling skills that determine the right product? Are sales and returns tracked by person? How often do you mystery shop the salespeople? Is the shop geared towards sales and returns prevention? What do you do with this information to create awareness and improve your training?
- The customer is home and they have a problem with the merchandise. Do you have a specific plan for keeping the customer at home? List the steps your people and the manufacturer take to resolve the problem in the customer’s home. Will this keep them from returning to the store? How have these steps been communicated to the sales associate or the manufacturers 800 line? How do you track the effectiveness of the plan?
- The customer returns to the store. The return customer is your most important customer, are they treated that way? Do you know what % of customers walk out with the same merchandise they came in with? (It should happen 50% of the time.) On average 30% to 40% of customers leave with cash or credit. Why? When this happens you’re losing a customer! There are specific training programs that teach techniques in handling this customer that will save the sale, have your people been trained?
- The merchandise is returned. When this happens how are you reacting to diminish margin erosion? Do you keep separate on line inventories? Are you tracking return inventory turn? Are you tracking profitability and productivity of your CRC’s? Does the decrement of inventory happen at the store and buyer level? How are you tracking margin and disposition of return merchandise? Do your compensation and appraisal programs reflect an effort to manage returns and hold people accountable?
To reduce returns and improve margins you need to treat returns as a business and manage it as a business. People who believe returns are a cost of doing business are living in the dark ages! Returns are a result of not managing your business properly. High Return Percentages are shouting to you that something is wrong with how you are handling the customer and/or the merchandise. Returns are not only a drain on profits but also on future business as the improper handling of a return can and will cost you customers. All the same problems exist for the manufacturer, my question for you, whether you are the retailer or the manufacturer is this:
Who is managing your returns?