Analysis

Many unhappy returns from the Consumer Rights Act

The new Consumer Rights Act came into force today (1 October 2015) and ushers in what some in the retail sector believe will be a new era of returns headaches. It’s not hard to see why. For the first time, consumers have 30 days to return faulty products and get a full refund – previously the law said shoppers had to make returns within a reasonable time.

Second hand goods are also covered, as are digital content, such as games.

As Vicky Brock, CEO of Clear Returns pointed out when writing for eDelivery recently, a sale only counts as a sale if the consumer keeps the item; otherwise it’s just a return waiting to happen. Now there’s a bigger window of opportunity for shoppers to find faults and return items there will be an inevitable increase in returns.

Some retailers have slick, efficient returns processes, minimising cost and fuss. Others, however, do not. Those struggling now face a considerable challenge in the wake of the new act.

While we’re looking into this topic, talking to interested parties, this seems like the perfect time to dust off a feature written by my colleague Emma Herrod earlier this year, which asked what retailers could be doing to ease consumer pain points, make returns processes more efficient and increase customer loyalty. It was first published in June and appeared in the second print edition of eDelivery Magazine.

 

 

Costing Returns

Not only do customers want retailers to offer free returns on goods purchased online, they also want them to simplify the returns process. More than half of the respondents to a MetaPack survey said that the returns process is too complicated, while 46% find dropping off a parcel inconvenient and 30% just find it difficult. Some shoppers would rather have their purchase collected by a delivery company, while others are happy to return it to a post office.
Over 25% of consumers return online goods more than 10% of the time – while this results in a healthy retail sector it does mean that retailers have to ensure a swift efficient and cost effective returns process is in place.

Royal Mail sorting depotThird parties such as Royal Mail are helping in the tracking of returns from the initial handover by the customer helping retailers to monitor returning items and therefore manage stock effectively. However, this isn’t enough since 71% of global, retail CEOs and 76% of those in the UK say that fulfilling returns from online and store orders are the most expensive aspect of omnichannel fulfilment and only 19% of the top retailers interviewed for the JDA/PwC study can fulfil omnichannel demand profitably.

Profitability is the biggest challenge because costs are rising faster than revenue says the study with 67% of respondents saying that their costs to fulfil omnichannel orders are increasing; handling returns, shipping directly to the customer and shipping to the store for customer pick-ups were cited as the highest costs. The direct correlation between these omnichannel tasks and the lack of profitability points out huge opportunities for improvement.

“In order to reduce costs and increase efficiency of the internal returns processes, retailers need to get items back into inventory and make them available for re-ordering and re-distribution as quickly as possible,” says Jason Shorrock, Retail Strategy Director, JDA. “Retailers must also prioritise the order fulfilment of ‘stranded returns’ – those items that have been sent back to stores or fulfilment centres that do not normally sell or distribute them.”

Speed, therefore, is of the essence with returns both in terms of processing so that the item can be returned to selling stock and in terms of the customer’s experience by being refunded swiftly.
The majority of returns are still through stores, explains Jonathan Gorst, Senior Lecturer at Sheffield Business School, and this is the first line of quality control for returned products. While retailers have different checks that store associates have to carry out to ensure that the customer and the return adhere to company policy and scripts to be followed with customers returning products in order to give a consistent experience, this experience can differ depending on how busy the shop is at any particular time. House-of-FraserReturning a product on a busy Saturday afternoon gives the customer a different experience since associates are concentrating more on selling for example. The item being returned may also not be as well checked than at other times, believes Gorst so the customer may get a full refund for a product even though part of the product is missing such as a remote control.
Companies also have different policies on whether Grade A returns can be put on a shelf in store and resold or whether they have to be returned to the main returns centre or DC. In the later case, how the return is handled in store has an impact further down the line. Not only in whether it can be put straight into a pick area for reselling but also on the DC’s forecasting and knowing what product is coming back, when.

“Communication is the main issue in returns,” says Gorst. Companies generally know what level of returns to expect from the different products they sell and through which channel. If they sell 100 units, they know to expect x percentage back. Retailers have all of that information but not necessarily in the same place, he explains, so cross communication of that information across the inbound and outbound parts of the business is imperative. “If you have a good sales day let them know,” he says.

Getting returned products back on sale as soon as possible is the main driver for many since it has an impact on sales and forecasting. While the returns are being processed they are not part of the stock pool so, how many extra of each item does a retailer have to order to pick up that slack? Efficiencies stop retailers over ordering and having obsolescence at end of life because they weren’t slick enough with their returns process.

SLICK & EFFICIENT
Some, such as Shop Direct, are very efficient with reverse logistics but for others, returns are the poor relations of the logistics world.
Gorst believes that Shop Direct’s efficiencies are born out its history as a catalogue company. Because customers tend to buy time and time again from the company using the credit arrangements, they need their credit account refunded with the cost of the return before being able to ‘re-spend’ the money. Therefore, it’s in everyone’s interest to put the credit back as swiftly as possible. Whereas for other retailers, there isn’t such an imperative to refund via the credit card company.

halfordsGorst also cites Halfords which employed a returns manager ten years ago, ahead of many other retailers.

John Lewis, which handles returns separately from other stock with a dedicated national returns centre in Solihull, can turn around returns in 48 hours. This includes overnight transportation of items that can be resold from Solihull to its main DC at Magna Park, Milton Keynes. When they arrive at Magna Park they are put randomly into barcoded pigeon holes and then picked for the next customer order.

HANDLING PEAK
As far as peak trading is concerned, we’re starting to see post-Xmas returns more spread out than they used to be, says Gorst. And retailers are becoming more efficient internally at handling returns. In product categories where customers could be returning counterfeit products instead of their actual purchase – such as is the case with the Ugg and Ray-Ban brands – staff are trained directly by the suppliers in how to recognise whether the item is genuine or not.

5227664185_5fcfcfc13c_oThis is just one way in which to speed up the process, while also protecting the brand since fake items which are passed for resale could end up in the next customer’s order.
Like other parts of the operation, the returns area can also gear up in terms of staffing level to handle peaks such as post Black Friday and Christmas.

“Returns are well-known to be a tricky area for online retailers, who sometimes struggle to keep up with rising levels of customer expectation. Actually, returns should be seen as an opportunity to build brand loyalty and retention through offering convenience and choice and a positive experience to support future spending,” says Kees de Vos, Chief Commercial Officer at MetaPack.
“It’s also a great opportunity to convert consumers at the point of checkout who read the returns policy before completing the sale. Retailers need to focus on making sure their returns strategy is water-tight and differentiates them from their competitors.”

With the link between returns and repeat purchases transcending the barriers of age and shopping habits, it seems that even retailers who operate outside of classically high return rate verticals, such as apparel, will need to heavily invest in their returns process to maximise the potential of their customers.

Fortunately, the management of a consistent and repeatable global returns process can be increasingly simplified through technology. Retailers are using innovative web technology services to make their returns process as seamless as possible. With the advent of the ‘big data’ age, the plethora of retail information available can now be analysed, in order to map and predict customers’ demands and expectations and prepare for their specific needs more effectively.

World map_DHL Resilience360The desire for more options also indicates a move towards a more connected way of working between enterprises. Kees de Vos added: “It’s important that retailers invest in reverse logistics capabilities to support multichannel so that increased volumes of returns can be managed independently without disrupting the rest of the system. In the future we can see one option may be to look at services like Uber that could offer a flexible pickup service as well as how expanding networks of click and collect sites can be utilised. A ‘shared’ economy approach may be the way forward for retail, with technology ensuring communication remains faultless.”

However, with Doddle estimating that £1.6bn worth of unwanted purchases are piling up in British homes as shoppers can’t be bothered to return them, believing the task of returning to be too inconvenient and lengthy, do retailers want to make it easier for customers to return goods or just concentrate on making their own internal processes as efficient as possible to get stock back on sale and the customer refunded so that they can spend the money again?


ADDITIONAL INFORMATION:

SHOP DIRECT
With an 80 year heritage in catalogue retailing, Shop Direct has a wealth of experience dealing with returns from its brands which include Very.co.uk and Littlewoods.com. Returns are reprocessed by the 500 employees at the company’s long-established returns centre in Oldham.

“We’ve been in this business for more than 80 years so we’re used to dealing with returns but are always trying to minimise those that are avoidable,” says Gareth Jones, Deputy Chief Executive, Shop Direct.

The company focuses on getting the basics such as imagery, descriptions and sizing information right on the websites so that shoppers can make informed purchases. It also has a clinical focus on logistics to ensure that customers’ orders are despatched accurately and on time.

When goods are returned, every item is examined and immediately credited back to the customer’s account. “Speedy refunds enable our customers to get back onto our website and buy again rather than wait around for their account to be credited,” says Jones.

After initial inspection, the company has a variety of options including various steam cleaning mechanisms, spot cleaning, reboxing or rebagging and minor repairs. The speed and quality of this work is crucial to get items back on the shelves quickly, explains Jones. “Our average turnaround time, from receiving an item into our returns centre to shuttling it back to one of our fulfilment centres to be resold, is around six hours.

“We succeed in reselling more than 96% of returned fashion items,” he adds.

 

 

 

 

‘Buy More Stuff’ image – Black Friday 2010, Westlake Seattle. Copyright John Henderson. Image from Flickr, under creative commons.. give attribution and link please.