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Solving the issue of product returns

Posted: 07 Feb 2012 ?? ?Print Version ?Bookmark and Share

Keywords:product returns? electronics manufacturers?

The United States consumer electronics industry is battling a behemoth, escalating and unsustainable problem: product returns.

The problem is not new. It has existed as long as there has been a consumer electronics industry. But in recent years customers' expectations have risen, products are increasingly more complex, and efforts to stop the wave of resulting returns have not kept pace. For companies to achieve high performance, this severe problem needs to be comprehensively addressed. Transformative systemic changes are needed now.

Accenture arrived at this conclusion based on new research revealing that customers returning electronics products will cost U.S. consumer electronics retailers and manufacturers nearly $17 billion this year, an increase of 21 percent since 2007. These costs include receiving, assessing, repairing, reboxing, restocking and reselling returned products. The report, "A Returning Problem: Reducing the Quantity and Cost of Product Returns in Consumer Electronics," captures key findings and insights based on the survey.

The research is based in part on a survey of executives from communications carriers, consumer electronics retailers and consumer electronics manufacturers. Our survey revealed that product return rates over the past three to five years have increased for more than half of retailers (57 percent) and nearly half (43 percent) of manufacturers surveyed. Only 13 percent of the retailers and 12 percent of the manufacturers surveyed indicated that return rates are trending downward.

However, the Accenture research also revealed a significant opportunity for the industry to cut costs and reduce the level of product returns, given that only 5 percent of returns are related to actual product defects. While 27 percent reflect "buyer's remorse," 68 percent of returned products are characterized as "No Trouble Found" (NTF). This means that, despite the customer perceiving a fault, no failure was detected when retailers and manufacturers tested against their specifications. When a customer returns a device to the retailer because the device did not meet their functional or usability expectations, it's a double tragedy: the customer turns unhappy with the experience and the retailer and manufacturer lose money.

But why hasn't the problem been addressed? For three primary reasons: First, returns are often thought of as a cost of doing business. Second, companies focus on efficiently handling returns rather than preventing them. And third, companies often adopt a one-size-fits-all approach toward returns.

What should be done?
Measure the impact of returns. Like manufacturers, retailers need metrics to assess the problem and track trends. It is critical to begin with a baseline to benchmark the current impact of returns. Using that information, they can determine cost-appropriate levels of improvement and introduce new approaches. For retailers, the most important metrics are: return rates by item; item class and manufacturer; length of time since purchase; and reason for the return. Without this information, it is nearly impossible to determine what new approaches might reduce return rates. No trouble found products are particularly important because, theoretically, these are 100 percent avoidable. The reason for any return ultimately deemed NTF should be studied carefully.

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