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September 9, 2010

Unlocking Value in Merchandise Returns

Over 8 – 15 % of a Retailers Sales are returned for various reasons. This can cause both a negative sales impact, and an increase in expenses. However smart strategies leveraging transaction information
and the best of analytics can help manage Returns leading to a significant boost to the bottom line.

As an illustration - for a $1B annual revenue retailer; the impact to the bottom line in terms of increased revenues and lower expenses can be as much as $20MM.

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A few areas where analytics can positively impact Returns:

1. Treat Returning Customers Differentially
  • Handling product returns should be an important component of a retailers CRM strategies
  • Retailers should capitalize on product return occasions and treat them as additional touch points to strengthen their relationship with customers
2. Encourage Cross-channel synergies
  • A cross channel return policy will create cross-selling opportunities. For example, retailers can encourage customers to shop in stores when they come to return online and catalog orders
3. Minimize Fraudulent Returns
  • Fraudulent and abusive returns cost retailers approximately $10-15B annually, accounting for nearly 10% of the return dollars
  • 30% of the top 100 retailers actively use a returns solution that can verify if the receipt is valid, but cannot intelligently advise the store about the validity of the return
4. Minimize additional expenses related to returns
  • Handling returns costs US retailers over $165B each year
  • Expenses related to returns such as product repackaging, markdowns and item disposition cost retailers even more