The Reverse Logistics Revenue Opportunity

Well-oiled returns process can foster customer loyalty, survey finds

Austin, TX  December 9, 2002  While many retailers continue to view reverse logistics as a necessary evil, a properly run returns program can contribute to customer loyalty and increased sales in the long run, according to the results of a survey sponsored by a returns management solution provider.

Reverse logistics is a key process for retailers, particularly in segments such as apparel, where as much as a third of a retailer's outbound fulfillment orders can wind up getting returned.

And yet many retailers have not focused on the potential upside of returns, according to Karla Taylor Villalon, director of communications and brand management at Newgistics, the solution provider that commissioned the survey. "Their main objective is to sell product and get it out the door," she said of retailers.

Newgistics offers a service, called SmartLabel, which provides pre-paid, pre-addressed return shipping label on customers' original invoices with their merchandise. A customer applies the label to the package and drops it anywhere into the U.S. Postal System. Newgistics collects, sorts and aggregates returned products for shipment to its own retailer clients, providing advanced shipping information and other customer-oriented and analytical data to the retailers as well. The provider's customers include Eddie Bauer, J.Crew and Spiegel Catalog.

The solution provider commissioned the Benchmark Co. to conduct research on consumers' attitudes towards product returns. A total of 700 consumers who had made recent purchases via catalog, Internet or TV shopping networks were interviewed regarding their return experiences, frustrations and preferences when returning items.

Among the key findings of the survey, 72 percent were very to somewhat likely to use the Newgistics solution, and 75 percent of these consumers were very to somewhat likely to buy more items from merchants offering an easier returns method. Moreover, 40 percent of respondents expressed frustration with the returns process, and 72 percent said they would like to see an easier process.

Perhaps not surprisingly, then, retailers are beginning to focus on reverse logistics as a potential area not only for cost cutting through outsourcing but also as a means to improve customer loyalty. "More retailers are seeing returns as an opportunity for improving customer satisfaction," said Villalon.

As an example of how a well-devised returns program can increase customer satisfaction, Villalon said data that Newgistics provides to its clients gives those retailers advanced visibility into incoming returned goods, giving customer service representatives information they can use to respond to customers who call in to inquire about the return or to request an exchange or refund.