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Omnichannnel Return Dilemmas

Omnichannnel Return Dilemmas

by Dr. Sunnanda Panda, Founder and CEO, RevLog Resources, India

Reverse Logistics Magazine, Edition 92

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No single formula, algorithm or crystal ball can tell us for sure when and why each individual customer will make a return and through which channel.

Omni-channel meaning “all” channels while multi-channel uses many channels. Omnichannel creates a consistent and accurate single commerce experience across the brand. So when people “order online and pick & return in stores”, it is clearly Omnichannel and not multichannel. Omnichannel involves using multiple physical and digital channels with customer experiences joint across those channels. Almost 70 percent retailers allow customer to buy online and return to store.

Ecommerce has fundamentally altered how companies go to the market – driving traditional retailers to either flourish or flounder on how well they can handle their omnichannel strategies to meet customer expectations. So it really boils down to: how can companies enacts an appealing return policy – one that can foster great customer experience and drive customer loyalty – while managing the complexities and cost of omnichannel returns?

Not many retailers can make their mark on returns especially omnichannel returns where only 32 percent retailers offer this as per a UPS survey. And from these as much as 90 percent of the online returns come to the store rather than through mail, making store a major player in customer returns. Therefore stores have to offer omnichannel capabilities – selling to walk–in customers as well as offering ‘Buy Online, Pick Up in Store’ (BOPIS) or Ship from Store (SFS), all factors to be considered for returns. Some omnichannel return dilemma to be worked out by companies are-

1. Returns fosters customer loyalty
As per Harvard Business Review, increasing customer retention rate by as little as 5 percent can increase profitability by as high as 95 percent, largely because acquiring a new customer is anywhere from 5 to 25 times more expensive than retaining an existing one. So while omnichannel commerce may lead to more returns of higher cost and complexity, one can leverage those returns to develop loyal customers through outstanding brand experiences. Though fostering customer retention through returns starts at a macro level but the real difference is made by the return policy, which either secures an order or loses it to a competitor for a lifetime. Tactically, a right blend of customer satisfaction and customer engagement would be the outcome of a value-added returns process. These two concepts help align company’s strategic positioning, so let’s understand the difference. Customer satisfaction is fundamental to the company’s service and product offering such as price point and product features. While customer engagement can be understood as an emotional connection. Companies who go beyond to achieve high levels of customer engagement by training customer service to create a memorable and meaningful interaction, tend to have customers more likely to come back to the brand, this obviously includes handling returns within the perfect window. By building trust though return, retailers can build a more intimate relationship with customers, gather more information from them and better tailor products and service offerings. This move leads to an overall gain by establishing customers’ loyalty for life.

2. Faster credit processing
Coinciding brand loyalty is quick credit to customers after a return. Increasingly customers want the credit process to be as easy as the initial transaction. As per a survey by JDA Software, the ability to buy online and return in-store has emerged as a core customer preference and its popularity has increased by 50 percent from 2016 to 2017. Which really means that by tangibly handing over the goods and ensuring return, consumers get a greater sense of control when they receive their credit immediately. If it takes too long people start to doubt the system! If consumers don’t trust the process, it hinders their likeliness of buying on the website again. If firms do not specify the warranty period, return period and other details, customers mistrust retailers.

Simplifying the process by directly enabling returns at physical locations can free up customer service to focus less on troubleshooting and more on higher-value activities. When dealing with returns, customer service can help save or facilitate a sale, that’s a revenue generating activity. Troubleshooting inquiries are non-revenue-generating calls that can be prevented with the right systems in place. Infact a robust IT system should communicate with many more notifications about the state of the returns throughout the return chain, thus building trust and creditability with customer, and facilitating another sale!

3. Speed with continuous improvement
The longer a returned good sits on a shelf, in a truck or in the backroom of a store, the less value one can recuperate. The cost implications become more severe when you consider the potential for duplicated processes, touch points and transportation along an omnichannel return flow. Sometimes finding a third-party logistics provider with a proven track record of operational excellence may be beneficial to improve reverse logistics operations. Continuous improvement across standardized processes and baselines should be developed as a culture and efficiencies should be incentivized throughout the supply chain.

4. Collaboration and training
Employee training and advancement efforts should be enhanced through technology that integrate across various channels like stores, distribution centers and returns centers to provide full inventory visibility, thus collectively improving the efficacy of returns processing.

5. Disposition optimization
Keep in mind that no organization is the same, and every reverse logistics operation is unique. Different types of products and fluctuating throughput incur different costs, and those same differences impact the size, location, layout, workforce requirements and processes involved at a returns center. In addition, various vendor agreements may dictate disposition methods, and specific industry will do the same too.

6. Tradeoff between policy leniency and profitability
Financially speaking, there is an inherent paradox to returns: We need to increase sales with a good return policy without driving excessive returns that will reduce/ lessen profitability? A lenient policy may increase sales and returns, though the jump of the former may be significantly higher than the latter. It’s increasingly hard to put the return’s genie back in the bottle; the only way out is creating a balance. Some brands have the financial wherewithal to absorb hits of larger returns and also mitigate the cost of such returns without materially impacting customer experiences but those who find it difficult will not be able to survive this retail game.

7. Return forecasting
Manufacturers and retailers agree on one thing for sure that returns are a major cost center. Normally returns are blindsided and omnichannel returns are challenging, but if one can use information like SKU count, product differentiation and multiple channels data across marketing return, seasonal returns and merchant–initiated returns then they can be managed proactively in terms of reducing cost, faster disposal and overall efficiency. Ultimately a good return process ties back planning operations based on the product, seasonality and customer behavior.

Companies must change their mindset to adapt to omnichannel returns as a tool…. The key is to know your customers and pursue them relentlessly based on your knowledge. Customers do not want any friction in the entire shopping experience including processing returns, at a local, national and international level. If a seamless, integrated experience is met, customer loyalty is established for life!
Dr. Sunnanda Panda, logistics professional with a PhD in reverse Logistics. Founder and CEO of RevLog Resources, India.
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