After an unprecedented level of growth during the late 1990s, retailers have struggled during the past few years to overcome uncertainty in the economy and maintain sales growth trends.  Proactive merchants are looking for innovative ways to protect the bottom line as well as differentiate themselves from competitive alternatives by improving the customer shopping experience. Returns management is increasingly becoming one of these opportunities. However, for most retailers, returns management is an afterthought. 
 
A Customer�s View of the Return Process
Anytime customers receive merchandise that they didn�t order, doesn�t fit or just don�t want, their relationship with the merchant may already be in jeopardy. Add to that the hassles related to the return such as waiting in line at the post office to pay for return shipping or wondering if the return has made its way safely back to the retailer, and the merchant could lose that customer for good.
 
In a typical return scenario, the customer has to locate the return address of the merchant, possibly call to get a return authorization number and then wait in line to mail the package back. After the package has been dropped off in the mail, the customer typically has no insight into what is happening with the return. To ensure the credit has been processed, the customer must reconcile billing statements or contact the retailer�s customer service department for resolution and confirmation of receipt and credit.
 
It�s not enough to provide customers exceptional service in getting packages out the door and into the home. Today, retailers must provide an exceptional return service in order to ensure loyal customers. The risk of a poor return experience is alienating direct shoppers who then lose confidence in the brand itself and in the direct purchasing process in general.
 
A Retail Dilemma
The problem is, many merchants treat returns as individual, disjointed transactions. They wait for a customer to call or the merchandise to come back to the warehouse before acknowledging the return. This creates uncertainty on the part of the customer and inefficient operations inside the warehouse. By not planning for returns or related issues with the original order, many merchants fail to control the entire returns process.
 
Few retailers have implemented integrated returns management systems that drive the process from initial customer return through the final disposition of the good, including re-entry into the forward fulfillment cycle. Because the return process can be as long as two to three weeks, companies often lose a significant amount of sellable time during a product�s lifecycle, possibly sacrificing the profit margin.  
 
The process of moving product from customers back to retailers, if designed and managed well, can reduce costs and improve customer satisfaction. Technology solutions have developed some capabilities that help automate the return process and thus reduce the expense and potential negative customer experience.
 
Why Now?
Over the past couple of years, there has been a renewed interest in returns management services sparked by a number of factors including:
 
� Competition for customers is at an all-time high and their expectations are rising. Today, buyers view the services surrounding a purchase as a major factor in their buying decision. 
 
� Returns Management is receiving increased attention due to the growth of channels like catalog and Internet sales. Direct retailing makes it easy and convenient for customers to buy goods, however, it does not allow consumers to see, test or try the product before buying it � fueling the complexity and importance of product returns.
 
� The cooling of the economy is placing tremendous pressure on companies to look for new sources of competitive advantage and to cut costs wherever possible.
 
Best Practices � Returns Management A to Z
A comprehensive view of returns management starts at the original order, includes the customer initiation of the return, processing and transportation through to final disposition and spans the physical and informational flows throughout the process. A best practice returns program can result in improved customer experience, new revenue opportunities, reduced operating expenses and reduced return cycle times.
 
A successful returns management program begins when the original order is packed and shipped, not only when a customer has a problem. The first step of a best practice returns management solution includes integrating the customer�s order information onto a return label barcode. Retailers generate dynamically pre-paid and intelligent return labels onto outbound order summaries. 
 
Proper labeling starts the data capture process. But it�s just as important to have systems in place for collecting barcode data. This extends all the way from the customer service applications to Warehouse Management Systems (WMS) to billing systems for crediting a customer�s account in short order. A U.S. Postal Service (USPS) approved pre-paid return label is recommended since the USPS provides significantly more convenient drop-off locations than other carriers.
 
Within days after the customer drops a return package into the mail stream, the label barcode can be scanned and customer return information reported back to the retailer. Therefore, call centers have insight to returned packages before they actually hit the retailer�s dock. Customer service associates can proactively address customers� exchange or credit needs earlier in the returns process, preempting and eliminating additional inquiries. The retailer�s receiving warehouse can also capitalize on returns visibility at the earliest possible stage. The advance return notification can be transmitted days before packages arrive at the retailer�s warehouse. This information can be channeled into better operational predictability and inventory control. 
 
Although supply chain processes still focus mainly on the outbound link to the customer, those retailers that focus on returns can potentially give themselves an advantage in the marketplace. Improved returns management can significantly reduce costs and provide valuable information to a retailer�s planning cycles. More importantly, improved and easy-to-use returns management processes can increase customer loyalty and customer satisfaction, resulting in higher sales.
 
Janet Mitchell is senior vice president of Solution Design at Newgistics, Inc. She can be reached at 512-225-6000.