Reducing Product Returns: Treat the Cause, Not the Symptom

Returned goods can hurt productivity, reduce profitability, and damage customer and supplier relationships. No wonder most distributors focus on reducing them – but they do it the wrong way! Often, distributors try to lower the rate of returned goods primarily by tightening up policies or by finding an efficient way of disposing of the merchandise, such as through liquidators.

It’s a no-brainer that reducing the frequency of returns altogether would have significant benefits for a distributor’s top and bottom lines. The costs of a return include:

• Lost sales
• Damaged and unusable product
• Cost of processing a return
• Excess working capital
• Angry and/or lost customers
• Damaged reputation

In a recent episode of our weekly live show, Wholesale Change, we posed a better solution for handling returns: Prevent as many returns as possible in the first place.

Watch Now: Wholesale Change Show: Many Unhappy Returns

Don’t just “accept” returns, solve them

Yes, product returns are a fact of life in the distribution industry. However, throwing your hands up and letting the damage accumulate won’t help. If you instead identify where things are going wrong, you stand to save a great deal of money and reduce the risk of losing customers.

A return in the B2B industry has greater consequences than one in the B2C realm. If a customer returns a T-shirt to Target, it doesn’t keep her from going about her daily life. If a B2B customer returns a part for a vital piece of equipment, it could stop production and cost the company money. If that return is linked to a poor customer experience issue, that customer will be less motivated to buy from you again.

Don’t place blame, own the problem

Manufacturers and distributors get tangled up in debates over who owns the return — in essence, who takes the loss. That’s missing the point. You as the distributor must own the problem if you want to reduce future returns.

Implement a process to analyze returns and identify primary causes. This will direct your efforts to reduce returns long-term.

Analyze and track return data:

• Brand and SKU
• Channel of purchase
• Condition (new, used, damaged, etc.)
• Customer reason for return

Use Pareto analysis to identify most common underlying causes for returns. Once you have that data, own the problem.

You’ll likely find returns are more often attributed to user error than a fault with the product.

For example, if customers are constantly ruining air compressors out of the box because they don’t put oil in before starting them (a real example), you could wrap super-sticky ostentatious warning tape around the prongs of the plugs. That makes it a lot harder to plug in the product (which is an automatic reflex when you buy something new) and the customer will notice the message as he’s removing the tape.

The growth in online purchasing has also likely contributed to an increase in returns for distributors, and a portion of that increase is owed to buyers not having all of the information he needs. Take these steps online to minimize returns due to incorrect product selection:

• Provide extensive product data. Mirror an in-person experience by providing all the information the customer needs and answering questions they might have – even if the answer is “no.”
• Include multiple, detailed images and videos. Again, mirror the in-person experience. Give as many visuals as you can to help the customer “view” the product and see it in action.
• Collect reviews. There are several mechanisms for collecting reviews to accompany your products, which customers can use to inform their decisions.  
• Offer live chat. When it comes to product selection, offer chat with a live person who can help the customer determine if the product is right for them.
• Show accurate delivery info. This is a simple fix to reduce returns due to late orders that forced customers to buy elsewhere when their original order didn’t show up on time.

Returns may also be linked to inefficiencies in operations, which, when uncovered, can be improved:

• Improve picking. Picking the wrong stuff in the first place is a big issue, but it’s also one of the easiest areas to improve.  
• Improve packaging. Damage in transit is another challenge. Enhancing packaging can greatly reduce returns due to damage.

Remember: Every credit memo you write represents something that went wrong for the customer. There’s no end to the benefits of getting the return process right, one of which is an overall improvement in customer experience.

Watch our episode for more on this topic:

https://youtu.be/2bDTOVHn1BY