The British have their Boxing Day, but did you know Jan. 3 is Returns Day? According to UPS, it's the biggest volume day of the year for returns. Most merchants face a flood about a week into the new year.
A disorganized returns process can result in unhappy customers, damaged or lost merchandise, and fewer post-holiday sales, says Eric Johnson, associate dean of Dartmouth College’s MBA program. “I’ve been to plenty of small retailers’ stores where you walk in and merchandise is sitting around with boxes half-open and partially processed. That’s just money laying on the floor.”
It pays to prepare for returns, as expected strong sales will likely mean more returns. The National Retail Federation forecasts $586 billion of holiday sales, up more than 4 percent from 2011.
To learn how to make the most of returns season, we rounded up tips from a variety of experts: Dartmouth dean Johnson; John Goodman, author of Strategic Customer Service: Managing the Customer Experience to Create Positive Word of Mouth (AMACOM, 2009); UPS retail consumer-goods marketing director David Sisco; and Kassie Rempel, owner of the luxury-footwear ecommerce site Simply Soles.
1. Plan for returns. Return volume can be estimated based on previous years’ patterns. For instance, Rempel knows that typically 23 percent of her sales are returned.
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The timing of returns can be forecast, too. Plan for Returns Day Jan. 3. Three to five days later, that return wave hits your warehouse or shop.
2. Make returns painless. Many retailers now include a return-shipping label in the box, and programs such as UPS’s Flex Access allow customers to pop their return package into their own mailbox. While some retailers worry that a generous return policy brings more returns, it also overcomes buyers’ fears, particularly for items such as apparel, Johnson says.
3. Enable tracking. When Simply Soles began in 2004, Rempel says the return policy was “fend for yourself.” But she quickly learned customers using their own carriers and paying their own freight made it hard to forecast returns. Now, she requires that customers contact the company for an authorization number, which creates tracking data.
She also integrated UPS’s WorldShip tracking technology into Simply Soles’s system, so the shipper can update her inventory when it picks up packages from customers. Rempel immediately puts expected returns back into available inventory with an estimate of when items will be available. Another shopper can reserve returning goods for purchase, even while the shoes are still in transit.
4. Develop a process. Make sure all employees know your procedures and handle returns in a designated area. At Simply Soles, merchandise is unpacked daily and checked to make sure it’s still pristine, then carefully repacked, logged into electronic inventory as back in stock and placed back in the warehouse.
5. Trust customers with exchanges. Customers hate having to ship back a return and then wait for the new item. Rempel says she sends the new item immediately. She also is considering UPS’s return exchange program, which adds a small cost but enables a UPS driver to both deliver the new item and pick up the return in a single trip.
6. Offer incentives for in-store returns. Customers who return in-store usually end up purchasing additional merchandise, Goodman says. If you have a physical store, consider offering an incentive such as a small discount on new purchases to customers who will bring merchandise back in person. Charging for return shipping also encourages in-store returns.
7. Do in-store returns quickly. Reduce long waits at the return counter by giving customers a short form to fill out while they’re in line, Goodman says. Their name, phone number and a short reason for the return should be enough. Trust that most customers are honest. The few thieves you might catch with an elaborate screening process won’t be worth your good customers’ ire.
8. Make it clearer. Many returns are caused by lack of communication, Goodman says. “Proactively warning customers is a delighter.” It’s not too late to add a prominent FAQs page or product tips to your website, such as “This clothing line tends to run large.”
9. Formulate a plan for merchandise you don’t want to restock. Storing seasonal merchandise to sell next year ties up valuable cash, Johnson notes. One option is to open an online outlet store, where you might offer your best customers special discounts. Sidewalk sales or “flash” closeout offers online are other possibilities for moving returned merchandise.
Goods also could go to resellers at a steep discount. But if it’s high-value merchandise you don’t want customers to see discounted, consider donating it to charity.
10. Analyze returns. Once return season ends, learn from your experience. Consider surveying customers to reveal hidden problems that prompted their returns, Goodman says.
Be sure to check to see if a lot of sale merchandise was returned. If so, you may want to alter your promotional strategy next December, Johnson says. “Really hot deals often create really hot returns.”
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The author is an Entrepreneur contributor. The opinions expressed are those of the writer.