Customer product returns are becoming more frustrating to both businesses and consumers. Last year�s total number of returned items was 100 million. Forrester Research expects that number to skyrocket to 615 million within three years. And that number does not include the 41% of online buyers who, according PricewaterhouseCoopers, wanted to return a package but didn�t because of the hassle involved.
 
The first line of defense, of course, is to avoid returns. There are two primary causes of avoidable returns: poor communication and disappointing quality. Even the quality issue can be addressed by improved communications. To avoid ineffective communication, start with better product descriptions. Then work on improved dialog between customer and order taker. Train your call center to ask a few more questions and to double-check some of the answers, especially color and size. Consider providing ready access to product specialists. This almost always saves money in the long run, and it�s great for customer relations.
 
Automation, especially in the complex area of distribution and shipping, is the best safeguard against poor communication. The Aberdeen Group recently noted that even experienced data entry clerks make errors up to five percent of the time. Also, it�s a good idea to review the capabilities of your CRM system with the goal of reducing returns. New features may be available.
 
Utilizing a good automated address verification system is critical. There are several alternatives available, ranging in price from a few thousand dollars to the high five figures. The U.S. Postal Service now offers CASS-certified data with residential indicator flag, which is especially helpful for B2B shipping.
 
You can also add business rules (built in �if-then� instructions) to your shipping system to better accommodate customers. If your shipper will not deliver to post office boxes, your system should have a business rule requiring such orders to be changed to specific street addresses or, if necessary, refused.
 
A recent Gartner report states that many potential catalog customers are abandoning the service because they fear their orders will arrive while they are at work. The solution: Have the packages delivered via basic service on Saturday. Depending on transit time, the shipments could be held for the appropriate amount of time and then shipped to arrive on Saturday. If there is a delay, for a reduced fee, signature confirmation services can guarantee the packages are not left on the doorstep.
 
Need more justification for avoiding returns? The cost of processing a return is estimated to be three to four times higher than an outbound shipment, according to Jupiter Media Metrix. Luckily, many cost-related aspects of reverse logistics can be eliminated by fully utilizing your parcel shipping system. Start by analyzing your current returns.
 
Just as your parcel shipping program can analyze and produce detailed reports on outbound parcels, returns can be studied, which helps to recognize who is returning what and why. In addition to informative reports, return forms can gather information from the dissatisfied customers. That feedback can be channeled to appropriate departments and top management. Sharing information across the enterprise can help product development create more popular products; manufacturing adjust incorrect size designations; or shipping find carriers more reliable to certain addresses.
 
Now for actually handling those returns: Hassle-free returns very are important. Eighty-nine percent of consumers who�ve had their returns processed easily said they would be willing to patronize that business again and might even buy more knowing there�s less risk involved, according to Jon Anton of Purdue University�s Center for Customer-Driven Quality.
 
Let�s take a look at the pros and cons of corporate product returns policy. Some companies ship a return label with the initial outbound shipment. The pro here is customer convenience and the creation of good will. The con, according to some retailers who are adamant on the subject, is that this encourages returns.
 
Some companies require a phone call to a returns center. The pro, perhaps, is that many people will not bother to call. And, handled properly, the verbal interaction could result in a product switch rather than a lost sale. It also is an opportunity to gather helpful intelligence. The negative is the customer is forced to make an inconvenient phone call. And the verbal interaction could result in further mistakes.
 
There is a third alternative, especially for e-tailers. The returns could be handled online. The pro is that it can cut costs and increase sales. And it is convenient. The con is that you need a robust Web site and sophisticated shipping system to create a highly functional online product return capability.
 
Why bother? First of all, putting your returns operations online could eliminate up to 75% of the costs associated with the reverse logistics process, according to Christopher Norek in Supply Chain Management Review. When a customer goes online to return a package, your shipping system can utilize business rules applications to find the best service coming back. It is not unusual for shipping costs to go from $22 for 3-day select to $9 guaranteed by end-of-day.
 
The pre-paid, addressed shipping label can be emailed and printed out on your customer�s printer, eliminating mailing costs and human error. Once a package is on its way back, an integrated shipping system can update the ERP and ensure that when the package does arrive, no one is caught off guard. Through proper label coding, the package can be directed to the proper restocking location or to a returns center. This eliminates costly backups and miscommunications, and it results in a program that guarantees the best service, with full visibility, at a reduced cost to both the customer and the service provider.
 
In addition to processing returns, your online program can act as a salesperson. Depending on the item being returned, the customer history (supplied by the integrated CRM or ERP) or the reason for the return, your online program could suggest an item for exchange that might fit better, appeal to that customer�s particular taste or relate to the original product but at a discounted rate. While it is difficult to completely make up the lost profit from a returned item, online programs can help you make the best out of an undesirable situation and allow you to improve sales and satisfaction.
           
Michael J. Kurgan is chief executive officer of ShipNow. He can be reached by phone at 312-587-2800 or by e-mail at mkurgan@shipnow.com.