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How to Reduce Product Returns and Boost Revenue

In retail, a product return is the process of a customer taking previously purchased merchandise back to the retailer, and in turn receiving a refund in the original form of payment, exchange for another item (identical or different), or a store credit.

To receive, sort/stage, process, analyze and support are more or less the same for all companies regardless their service or product. It really doesn’t matter. The common thread is it can be a complicated process if not done right. No one wants this headache, but it is a necessary task if you are selling ecommerce products. Inevitably some items will be returned. Below lists the various stages, detailing how the entire procedure works from inception to completion.

#1 – At The Receiving End

This is a critical early step in the long laborious process. During the beginning stage, returns are typically received at a warehouse or distribution center. Often, a first step in this process is to acknowledgment of the return.  Returned items may include a wide variety of products, returned through various carriers and in all kinds of packages big and small... Whether it is individual containers, large boxes, cartons, etc., it’s a much different process than when the items were originally shipped out to their recipients. The way that individual articles are accepted directly shapes how products are sorted and staged in the next step of the returns process.

Many companies feel it is cost effective to make a decision about a returned item early on. The rational behind this approach is that returns are evaluated ASAP when they are received to assess their worth. The advantage is that processing expenses can be avoided for products that are absolutely worthless and incurred only for those items with significant value. These are the items that can go back into the regular distribution channel.

#2 – Arranging Items Systematically & Staging

Once items are received, they are sorted for further staging in the returns process. This is based on how the items have been returned, the type of return, or the size and number of the item being returned. This is not an exact science; therefore, various options are possible, with parameterizing taking place. Typically this process along with receiving takes on average 2-3 days to complete.

#3 – Process Those Returns

In stage 3, their stock-keeping unit number defines the returned products further. It can be returned to stock/inventory, while vendor returns are organized according to the specific vendor name. It is at this point that customer credits can be given, although most companies do not issue credits until later stages.

Items move from the sort-and-stage area to the processing areas. The procedure for these items is sequence based, i.e., on their receipt, by type of product, by customer type or location, and the actual size of the items…

A variety of items helps to even out the workflow and makes it easier to develop piece-handling metrics and standards. Returns can even be placed on a conveyor belt after being received. Next they are moved to processing stations where each station has a line equal to the number of return items. Having accurate data on the label will allow the items from the same customer to be sent to the same conveyor line for concurrent processing.

The paperwork that came with the return is separated from the article and these documents are then physically sent to the administrative area for comparison with the digital records.

#4 – In-Depth Examination is Critical in Making A Profit

It is at this stage that employees must be the most thoroughly trained, since this is where the most important configuration decisions are made. The rating on the item varies depending on the product disposition strategy implemented. People involved in this stage must be very knowledgeable about the products, repairing or refurbishing opportunities, allowable versus non-allowable returns and the monetary benefits associated with each disposition option. E-commerce products that can be repackaged for resalewill return greater monetary reward than items that must be refurbished or remanufactured prior to sale. These items always result in much higher revenues than items being sold as is.

Marking is the final part of stage 4. This needs to be planned well ahead of time for the sale of repackaged, repaired, refurbished or remanufactured products. Often these are sold in secondary markets for extra revenue, to a market segment reluctant or unable to afford the purchase of a new product. An understanding of the customer needs is paramount in this market. It will determine price and proper distribution channels. Effective marketing strategies for repackaged, repaired, refurbished and/or remanufactured products frequently is the determining factor as to whether a company will make a profit in their returns process.

#5 – The Resolution (Support)

At this point, the placement of each returned item has been resolved. Items are disbursed according to where they should go. Back-to-stock items are returned to inventory. If some fixing up is necessary, appropriate actions are taken to get these articles into a sellable state. Cost of repair for ecommerce product returns needs to be weighed against profitability. From a service perspective, making these sellable items ready for resale to customers sooner improves service levels. This is particularly relevant if there is a demand for the items and regular inventories have been depleted. Supply and demand

E-commerce products that are returned to vendorsmust be handled quickly, because vendor return windows can be short. Speedy processing of returns will reduce the amount of cash tied up in returns inventory, increasing the profitability of the process.

Sometimes processed items will be resold in one of my favorite locations – the outlet stores. They also may be replacements for warranty repairs, sold to wholesalers, off-price retailers or offshore buyers. Donating these items to charities is another option. If the items are not sellable, they will likely be sold to a scrap dealer who will purchase the items for the value of their components.

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