2009-03-19
5 Ways to Reduce Returns

Intense competition in the retail puts increasing pressure on manufacturers to deal with returned merchandise. In 2008, returns are estimated to total $219.1 billion, an increase of $41 billion. Many retailers have established their return policies with the belief that the "customer is always right" i.e. The Rite-Aid pharmacy chain encourages customers to buy a stick of lipstick, try it out and bring it back if they don't like the color. Customer service seems to be tantamount to maintaining extremely liberal return policies. However, customer service should not sabotage your profits. Here are 5 ways to reduce customer returns.

1. Use your website to prevent returns
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 a return trip to the store. When Petco set up customer reviews on its Web site, the store's return rate immediately went down 20%. When the chain offered a $100 gift certificate in a sweepstakes to customers who posted reviews, it realized an 800% increase in customer reviews. More customer reviews drive higher sales, lower product returns and more search-engine traffic. The more reviews a product gets, the better. For example, a product with 50 reviews has a 135% lower return rate than products with fewer than five reviews.

2. Prevent return fraud
Requiring photo ID for returned merchandise is an effective and now commonly used practice. Retailers can feed names into databases that flag people for repeated or suspicious returns and eventually bar abusers from returns. Over 20% of merchants use this process, even for customers who produce receipts and 70% require identification without a receipt. Return fraud which includes bringing back used merchandise for a full refund cost retailers $3.5 billion in the 2006 holiday season. The most popular form of return fraud is the return of stolen merchandise. The use of bogus merchandise receipts is another problem. With a high-quality scanner and printer, people can copy and alter receipts, making it easy to return stolen goods. The good news is that although return policies have toughened, 89% of consumers still find stores' policies fair.

3. Have a solid return policy
You need to have a solid returns policy in place that complies with the law. In most cases, retailers are under no legal obligation to accept a returned item for any reason other than a defect.

• For credit card purchases limitations on refunds must be posted in the store and printed on the customer's charge receipt within one-quarter inch of the cardholder signature.
• You should also have a clearly visible sign in the store.
• If refund restrictions are not clearly stated on the receipt, the customer can successfully dispute the charge.
• Regarding credit card sales, retailers are not allowed to give cash refunds or payments on any bankcard sale; they must credit the customer's account.
• Your policy should include asking the customer why the item is being returned and have a form to fill out which provides backup evidence on the return or used for proof to the supplier if something is defective.

4. Preventing returns start before the sale
Almost everything that impact returns actually occurs before the sale. Delivery time for ordered products is extremely important. The longer it takes, the more their desire will fade, increasing the possibility of a return. Price increases sometimes make returns more likely, but other times they attract a more qualified customer and returns are less likely. Log returns with reasons and review trends and determine what could have been done to prevent the return. Sometimes the answer may be as simple as improving instructions in the package. The more information given BEFORE the sale will reduce returns on that product. Informative displays along with better trained associates help assure that the product fits the need of the buyer - therefore lessening returns.

5. Train sales personnel
You should help your retailers provide clear, factual and concise selling messages to customers. Remember that customers do not purchase products intending to return them. A return is an inconvenience and intrusion on their limited personal time. Ensure retailer sales personnel provide clear messages to potential buyers about the BENEFITS of your products. Without the proper training and product education, sales associates could be recommending the wrong items which leads to product dissatisfaction and then returns. Recognizing sales associates who have completed a training or certification also goes a long way. Did you know that the CosPro agency provides product and sales training for store employees? Call the CosPro agency to find out how you can participate in one of our training programs.