Return Policies Will Affect Whether Customers Shop With You
With a recovering economy, many catalog, eCommerce and retail businesses are trying to significantly reduce returns as a supply chain strategy in order to boost profits. Some companies are putting more restrictions and conditions on returns. Frankly, I think this will cause further erosion of sales. Who wants to buy a product that can’t be returned, or that carries so many conditions for return? However, others are doing what I call “save the sale”, that is, work with customers to help them understand the product and how to install or use it. Consumer electronics, software and technical products are far and away the biggest problem areas that could benefit from this approach. Case in point, recently our consulting firm had lengthy, painful experiences with two of the major U.S. software companies. In dealing with one of the companies, one of our people was transfered to an India-based call center, and spent five hours on the phone while trying to install a new version of software on a laptop. If we had any choice we would have asked for our money back.
Bill Crutchfield, president and founder of Crutchfield, Inc., the car audio and home theater direct marketer, learned early on in his business about customer returns. He told me a while back that he almost quit the business over 20 years ago because returns were so high. Luckily, before he did so, he decided to call many of the customers who were returning products to find out why. What he learned was that the customers were frustrated by not being able to install the product in their vehicle; there were no instructions provided by the vendors! He realized that he would have to invest in documenting how to install those products in each and every vehicle.
Now, Crutchfield has a database of thousands of models that their technicians can use to talk customers through the installation. Crutchfield also developed product mountings to hold the products to the car dashboard and interior, and they produce customer vehicle-specific instructions with pictures. In the end, Bill Crutchfield’s lesson resulted in one of America’s largest, most innovative and customer-centric multichannel marketers.
I have no doubt that how you treat customers with regard to return privileges will greatly affect your future sales. I’d follow the leadership example of companies like L.L.Bean, with a “no quibble” guarantee. In the case of L.L.Bean, a true story goes that all of their original Maine hunting boots had product problems and most were returned. Leon Leonwood Bean stayed true to his word and refunded the purchase price. But he also stuck with it, correcting the problems and posting a sign in the store: “I do not consider a sale complete until goods are worn out and the customer is still satisfied. L.L. Bean 1916.” If you go to Bean’s Web site, and look under Company Information, you’ll see many other sterling things they have to say about customer satisfaction.
Drawing upon the Crutchfield and L.L.Bean examples and our own supply chain consulting experiences, here are some action points to consider regarding returns:
- Dig into the reasons for returns through return correspondence, Web and chat messages, and most importantly, call center dialogue.
- Merchants should buy net of planned returns rather than gross demand to lesson affects on inventory levels.
- Returns cost more than orders to process. Streamline the supply chain logistics processes and the order management system or warehouse management system to accommodate returns.
- Credit customer accounts quickly. Customers are at their credit limits. Lagging credits and refunds add to customer dissatisfaction.
And finally, remember that how you treat your customers helps them differentiate their customer shopping experience with you from that of your competitors.
If you’re interested in more information on handling returns or other supply chain strategies, contact Jeff Barry at jbarry@fcbco.com, or call (804) 264-8040. F. Curtis Barry & Co. is a national consulting firm that works with eCommerce, catalog, retail, manufacturing and wholesale distributors on projects focusing on supply chain strategies, order management systems, warehouse management systems, inventory management, third party logistics, and to reduce freight costs.
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