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Nov. 12 2008 03:17 PM

When a product shipment heads out the door, many would assume the direct retailer could simply book the profit and move on to the next item for sale. But those in the shipping and retail industries have long realized that is not the end of the story. Product returns are an unpredictable and extremely costly part of the complex retail mix.
In fact, nearly every arm of a company can be impacted by a single return. From the call center, logistics and shipping, to the processing center, a returned product skims revenue slowly and surely away from operations. Each year, product returns in the United States cost retailers nearly $14 billion alone, according to a recent Accenture study. On top of these obvious sunken costs, a retailer without an efficient returns management system in place also risks losing more than that: its customers. A recent Harris Interactive survey found that 69% of customers would not likely shop again with a direct retailer if the returns process was inconvenient.
It doesn’t have to be this way. Thanks in large part to the Postal Accountability and Enhancement Act (the Postal Act of 2006), retailers can transform returns into an opportunity to retain customers and actually grow their revenues through repeat sales.

Postal Service Returns

The United States Postal Service has transformed itself over the past 19 months, working with shipping partners and customers to create the types of services and offerings not previously seen from the government agency. These new capabilities utilize the strength the Postal Service has always maintained: the first and last mile advantage. Delivering to 146 million addresses, the Postal Service touches every house and business in the country six days a week, in turn giving retailers the ability to reach those locations.
For example, since 1999, the “Parcel Select” service has given shippers and retailers a last mile advantage by handing off distance delivery to a private delivery network such as Newgistics or UPS, while utilizing the cost and efficiency of the Postal Service’s local capabilities.
More recently, “Parcel Returns Service” (PRS) gives retailers the first mile advantage as well. Using the Postal Service “first mile,” a logistics management firm will pick up product returns at those 146 million locations, delivering it back to the retailer, while providing end-to-end tracking of that package. Once the package is scanned, the retailer is notified and shipments are consolidated, ensuring prompt consumer refunds, reduced distribution costs and quicker product recovery. This service has already managed more than one hundred million returns.
Without an intelligent way to manage returns, like PRS, consumers and retailers are both operating blindly as they work out their differences. It goes like this: a customer receives the product she unfortunately doesn’t like and decides to return. It’s unclear to her how to make the return, so she places it in the box and waits, while the retailer doesn’t even know there’s been a problem. She then makes her first call to customer service in order to get returns instructions. Finally taking it to the post office or other delivery service, she pays the postage fee out-of-pocket.
The retailer now knows there’s been a problem but cannot create a resolution until the package is in its returns center and opened to determine just exactly what was returned. After all, according to the National Retail Federation, returns fraud cost retailers nearly $11 billion in 2007. This notification takes 10 to 12 days, with the customer waiting and calling customer service multiple times to determine if her return was credited. This racks up costs for the call center. She finally realizes she’s been credited, thanks to her most recent credit card statement. Additionally, the retailer, who isn’t prepared to receive the return, incurs delays and additional costs at the processing centers.
But by using the Postal Service’s PRS, the retailer receives the benefits of an intelligent returns solution without incurring additional shipping costs.

The Smart Way

PRS begins with a pre-paid postal consumer return label that easily improves the customer’s returns experience while lowering the retailer’s operating costs. Included on the customer’s packing slip, a label can be peeled and placed on the original box for immediate and simple returns.
Additionally, the barcode on the label contains as much or as little information as the retailer requires — from customer name, product and order number, to customer email address and other unique information. Once the Postal Service picks up the package, the provider takes that package and scans it into its returns management system. At this point, the retailer receives advanced return notification, and the customer can be informed that their return was received and will soon be credited. The return products are then palletized and delivered to the retailer’s processing center when it’s optimal, based on timing and workforce required to handle the restocking.
The benefits immediately compound: convenient returns save customer time, convincing them to buy again. A recent Harris Interactive survey found 90% of customers say it encourages them to shop again. Those retailers can obviously profit from those return customers. The retailer also saves on increased visibility that reduces call center costs and aggregates containers for processing centers. The retailer incurs no additional cost because the customer is charged the delivery cost for the return, which is deducted from the customer credit

New Returns Offerings

Because the Postal Service has worked to improve through the Postal Act of 2006, it is continually adding services to fill out its offerings. The Refused and Undeliverable Package Service using PRS significantly reduces costs when a package is refused or there is an incorrect address. Instead of automatically returning the package to the shipper at the full Parcel Post fee, it will re-enter the private network with address correction, where it can be resolved based on the retailer’s preferences.
Consumers can also now schedule free next-day carrier pickup, where pickup is arranged via the web. A carrier -based Returns Center portal also gives retailers the ability to allow their customers to get warranty items authorized for return. They can track that return, as well as increase the retailer’s own visibility throughout the reverse supply chain. It’s all an extra level of convenience for the consumer, which can only increase loyalty.
The Postal Service has a long-standing advantage in its first and last mile delivery from the home or business to the post office. With the passage of the Postal Act of 2006, retailers now have the option to utilize that advantage end-to-end and to great effect.
Where retailers had once been able to use just the last mile for deliveries, with Parcel Returns Service and other new offerings based on PRS, they can now take that first mile as well. This creates convenient returns solutions that bring customers back, knocking away the unpredictable costs of the sophisticated retail and returns system.
Bill Razzouk is the CEO of Newgistics, Inc., an Intelligent Logistics Management (ILM) firm that simplifies the shipping and returns process by optimizing the first and last mile of USPS-based packages.