STORES 2017 BIG Show Daily - January 16, 2017 - 8

2017 MONDAY

8

Omnichannel's Pervasiveness Requires
an Efficient Returns Strategy

N

ot long ago, retailers were preparing for not only the busiest
season of the year, but also for the
onslaught of post-holiday returns. A 2015
consumer survey from the National Retail
Federation revealed that one out of three
gift recipients returned at least one item
during the holiday season.
Today's returns require a reverse
logistics strategy that works from the
consumer all the way back to the manufacturer. Inefficiency can result in reduced
brand perception and customer satisfaction, abandoned shopping carts and loss
of revenue.
A January 2016 report by technology
research and advisory firm Gartner said
retailers are sitting on a "ticking time
bomb" due to historical underinvestment
in returns management and the rising rate
of returns.
Looking at the returns practices of
300 omnichannel companies, Gartner
found just half of returned products were
resold at full price. While retailers are
opting for easier and generous return
policies to stay competitive, "The ticking
time bomb emerges when retailers pursue
strategies that lead to increasing returns
volumes while operating supply chains
that lack the ability to cope with the increase that is generated," the report said.
Omnichannel retail has not only
increased the number of returns but also
complicated the process, with more returns coming from more channels: A product bought online in Georgia and shipped
from a Memphis distribution center could
be returned in a store in Houston and sent
via mail to a returns center in Ohio.
"If you look back 25 years ago, return
to the store was the only method. It was
a fairly clean process," says Jim Brill,

UPS corporate returns services marketing
manager. "Online purchasing and local
purchasing ... has really added a lot of
complexity."
As omnichannel fuels more returns,
fraud is rising as well, says Robert Moraca, NRF vice president for loss prevention.
According to NRF's 2015 retail return
fraud survey, almost 4 percent of total
returns are fraudulent. Annual merchandise return fraud and abuse combined is
estimated to be between $9.1 billion and
$15.9 billion for the entire retail industry.
Retailers "have to balance the need
for customers to have a good shopping
experience versus questioning someone
or holding up returns because you think
there may be some fraud involved,"
Moraca says.

Starting with
customer experience

The Gartner report recommends
that heads of supply chains invest more
in reverse logistics capabilities to support omnichannel growth objectives and
manage reverse logistics independently to
improve supply chains.
Gartner also recommends free or
lower-cost shipping and return policies
that increase online revenue and reduce
basket abandonment, and says retailers
should reduce excess inventories by improving the link between product being
brought in and returned product already
in the supply chain.
Products returned to stores need to
be rapidly added to the inventory to start
the return journey. Retailers must clearly
identify process steps and owners in the
return path, then create efficient systems
to track and value the flow of product.
"Reverse logistics requires different

A product bought online in Georgia and
shipped from a Memphis distribution center
could be returned in a store in Houston and
sent via mail to a returns center in Ohio.

While most traditional warehouses and
distribution centers are streamlined,
return centers may not be, adding to the
ongoing challenges of efficient returns.
thought processes, technologies, capabilities and expertise," Gartner said. "The
process needs to be managed through
dedicated resources supported by a holistic and integrated set of key performance
indicators."
Jennifer Sherman, senior vice president with omnichannel retail solutions
provider Kibo, says reverse logistics
strategies must start with the customer
experience.
A common problem is in-person returns of online merchandise. "Just being
able to take that return is hard enough for
many retailers," Sherman says, "let alone
the disposition process if it's a product not
normally sold in stores."
Louis DeJianne, UPS director for
retail and consumer products, says omnichannel returns can be a strong driver
of sales and customer experience: Some
studies have indicated that up to 70 percent of customers make another purchase
during an in-store return.
"From a retailer's perspective, it's
about how do you offer [generous] return
policies and mitigate and minimize the
cost of returns," DeJianne says.

Optimization through
customization

Tony Sciarrotta, executive director of
the Reverse Logistics Association, says
optimal returns channels depend on the
retailer's size, the distribution network

and the merchandise. Products may go
back to a liquidator, to a manufacturer or
back through the forward logistics channel
to the distributor.
"There are many different ways of
doing it and I don't think anyone has
determined the best way, because [it all]
involves the complexity of tracking,"
Sciarrotta says.
Retailers need a high level of visibility into how returns move through
the system. Sherman says traditional
enterprise resource planning and inventory systems can't always track the status
or disposition of products in the reverse
supply chain. She says many retailers need
to do "interesting software acrobatics" to
obtain visibility into unknown, possibly
damaged or defective, products working
their way through the system.
"That visibility and ability to disposition inventory is critical, so that we can
redistribute it, resell it and not treat it like
it's dead stock and useless," Sherman says.
Retailers should also strive to reduce
return center inefficiencies and costs.
While most traditional warehouses and
distribution centers are "streamlined to
the max," Sciarrotta says, most return
centers are the opposite, "with stuff just
dumped everywhere." He says resolving
some of these visibility and organizational
processes starts with software.
See "Reverse Logistics" on page 10
STORES 2017 BIG Show Daily - January 16, 2017

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