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Study: Consumers Expect Faster Returns than Retailers are Delivering

Getting customers whatever they need whenever they need it, and as quickly as they expect it, has become easier. Yet the returns process has some retailers winning and others floundering.

Global management and consulting firm Kurt Salmon’s recently released omnichannel fulfillment study analyzed retailers’ peak season fulfillment and found that when it comes to getting consumers refunds for products they’ve rejected, retailers scored subpar ratings.

According to the study, consumers think a refund should be processed in roughly seven days (younger consumers expect even shorter time frames), and retailers took an average of 16.8 days to credit a return during the peak holiday season last year.

Those retailers that are winning have one thing in common: their return time frames are very close to actual transit times, meaning they have a step up front that doesn’t require a lot of labor.

The study noted that J.C. Penney and American Eagle came out at the head of the class for their returns processing during the holiday, both getting cash back to consumers in under five days.

Steve Osburn, Kurt Salmon’s supply chain expert and partner in the Retail and Consumer Goods Practice said one thing brick-and-mortar locations have over pure play platforms is immediate credit for returns.

Today, according to a 2014 NRF study on returns, 87 percent of retailers let consumers return e-orders to stores, up from 82.5% in 2013, but mail returns are where the problems lie.

Some retailers may not process returns at lightning speed, but what they are doing to accommodate demanding consumers is issuing credits immediately upon receipt of the returned product and dealing with the rest of the return later.

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“From the customer side, that gets you the credit a lot faster,” Osburn said. And since waiting to process a return before issuing a refund doesn’t get inventory back on the floor any sooner, retailers would do best to return consumers’ money right away.

“A lot of retailers will have returns go to a consolidator, which might add a day or two to the process,” Osburn said. “But it’s just a sticky business when you get back a box of returns, you don’t always know what’s in it, it doesn’t have the right paperwork. People [retailers] that are doing it well have dedicated returns centers.”

Those returns centers can streamline not just the process, but costs as well. Especially in an era where many retailers are offering free shipping and returns, making consumers feel fine about ordering two sizes of one outfit just to see which fits better and expecting to return the other.

Another area where the study found retailers need improvement for fulfillment was inventory shortages and order volumes above forecasts.

Osburn said acing omnichannel is all about inventory placement and accuracy, which may not be news to retailers, but many still aren’t getting it quite right.

“From an omnichannel perspective, communication continues to be the key,” according to Osburn. Merchants and planners need to be realistic about their plans, then provide those plans to the supply chain so others can plan for sales and volumes that will come in. “The larger volumes that these companies are doing in growth continues to slow a little bit—before it was 30 to 50 percent, but now companies are settling in at 20 percent year-over-year growth, so planning for back-to-school, planning for holiday season, planning for all of that is becoming a little bit easier,” he said.

One way to make sure your inventory meets consumer demands in terms of both availability and speed, aside from implementing RFID, of course, according to Osburn, is to “go a little less on store inventory and go a little more aggressive on holding some inventory back through the distribution center.”

According to the study’s analysis of Cyber Monday orders, it took an average of 3.2 packages coming from multiple zip codes to receive eight items.

“Too much inventory in stores and not enough in distribution centers can cause retailers to pay more for fulfillment while charging less. Retailers need to focus on what their omnichannel fulfillment strategy means for inventory placement.” The study noted.

Osburn added, “Once companies get an understanding of what the customer needs, they can plan for where they need to have those goods at the start of the season so that they can get it to consumers quickly.”