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July 24 2006 03:48 PM

The fulfillment and distribution reality check that struck the direct marketing industry in the last year has come full-circle. Its not enough to provide customers exceptional service in getting packages out the door and into the home. Now you have to provide an exceptional returns solution. The reward is loyal, better and more profitable customers. The risk of a poor returns experience is alienating an entire generation of direct shoppers who then lose confidence in your business or the act of direct purchasing altogether. The good news is there are now returns solutions that make things easier for both the consumer and retailer.


Returns   Who Needs Em?

Retailers hate returns. Direct marketers hate them even more. The costs and complexities of returns have often been a nightmare for businesses and consumers alike. You not only lose the sale, but there are also additional costs for processing the return. This expense is heightened in a direct marketing environment versus the brick-and-mortar retailer who has lower cost options available.


When you talk to direct marketers, their opinions about returns often hinge on whether they are in operations or marketing. Managers in the logistics or fulfillment side are working hard to manage overall costs. The last thing we want is to make it easier for the customer to return merchandise, some have said. Its a double negative hit against our bottom line and a major logistical nightmare at that. Our goal is to minimize returns, not facilitate them.


On the other end of that spectrum are the marketing and customer relationship folks who see building long-lasting relationships with customers as a top priority. They want to tap into a huge base of potential customers who would order more often if there was a better and lower cost way to return merchandise.


When RR Donnelley Logistics acquired package consolidator CTC Distribution Direct, it asked package delivery customers what they really wanted in new and enhanced services. Returns were consistently cited as not only a need but as well as an opportunity. This finding was echoed across the industry as companies scrambled to figure out a better way for direct marketers and their customers to handle the returns challenge. The backdrop was a host of new online businesses and solution providers fighting for the returns space.

Sorting through all of these options was not easy. But early on in our analysis, it became clear to us that the ultimate solution would be consumer driven. Consumers are the ones who have the real votes in todays retail and e-tail economies, and no matter how you choose to define or count those votes, the winning solution will be the one that best meets customer needs and concerns.


What Consumers Want

Extensive survey research was done and several focus groups were conducted to identify consumer preferences. Here are the key findings:


           Consumers want easier returns, fast credit processing, local returns and face-to-face service.

           An unhappy returns experience is often fatal in terms of the customer relationship. Forty percent of all those who returned merchandise never came back.

           Consumers prefer the brick-and-mortar returns experience local, face-to-face, immediate credit.

           Consumers dont want to pay to return merchandise.

           They dont want to wait in lines, wait for a credit, box up their own merchandise and then send off a package return blindly through the mail or other service that leaves the immediate resolution of the return in doubt.


Happier Returns Equals Happier Customers

What is most surprising in the research is the extent to which unsatisfactory returns options have played in consumers decisions to purchase direct through catalogs or online e-tailers. Yes, returns cost money. But what is the opportunity cost associated with someone who never comes back or who never even considers buying in the first place? Will giving consumers the confidence that they can more easily reverse a buying decision make them better long-term customers? Will the net profit from these happier and more confident consumers outweigh the cost of the returns? Thats the new bet that is being waged by todays direct marketers.


Some of the most successful direct marketers who have built their reputations and businesses over time on a foundation of customer service have been among the first to embrace the new customer-focused returns solutions.


Based on consumer research, here are some benchmarks for a successful, consumer-friendly returns solution: Neighborhood storefront return option: Consumers dont like boxing up merchandise and sending it back somewhere with no immediate resolution of their return. They prefer a process that most closely replicates a brick-and-mortar returns experience face-to-face with a real person at a location convenient to their home or workplace.


Fast credit: Consumers dont want to wait for weeks to get a credit on returned merchandise. They dont want to monitor billing statements to confirm a credit has been received. Immediate or fast credit (within 24 to 48 hours) is key.


Minimize handling/packaging: People dont like having to repackage their merchandise and ship it back. Make it easy, make it simple.


Keep returns expense low: Consumers ultimately bear the expense of a return. Some returns solutions are much less expensive than others. Bear or share the costs. Consider offering a coupon or discount on the next purchase to mitigate the expense or hassle of a return and to help ensure you dont lose customers.


Customer-friendly, exceptional service: Consumers prefer the human interaction of a face-to-face returns solution. But make sure the people you have processing your returns are well-trained and well-equipped. A successful service network has to excel with both people skills and technology to ensure a satisfactory customer experience.


Back to Business

Once you have measured a returns solution against all these consumer criteria, you still have to evaluate from an operations perspective. What happens to the merchandise when it is returned? Can the service be customized to your business? Is the technology platform flexible, powerful, reliable? What are the overall costs of transporting returned merchandise? Is there a good system to efficiently process/dispose returned merchandise?


The latter questions have always dominated the returns debate. But now consumers are more in the drivers seat. Get on board or get out of the way the returns revolution has begun.


Matt Bernstein is senior vice president of Marketing for RR Donnelley Logistics. RR Donnelley is partnering with Newgistics, which launched ReturnValet, a returns management service for Web and catalog retailers. Matt can be reached at 630-322-6692, or e-mail