Demystifying Customer Returns

Let's face it: No company likes handling customer returns. They generate negative revenue, result in significant costs, and in most cases, the returned items can only be sold at reduced prices, often leading to item-level losses. This situation is the same for retailers and OEMs across most industries. But is there no way around it?

Amazon, one of the world's leading retailers, was founded on the following values:

Customers are not loyal. If you want to retain customers, you have to focus on them permanently.

If you consistently focus on price (competitive pricing, not the cheapest offering), selection (customers can only buy products that you sell), and availability (if you do not have the item available, customers will not buy it), you will generate a satisfying shopping experience for customers. This will result in your store/Web site becoming the first point of contact for customers. This is valid for both retailers and OEMs, and will continue to become even more so the less differentiated the offered products become.

But in my opinion, Jeff Bezos missed one important aspect: A return policy can—in the long term—have a huge impact on purchase decisions. Customers remember when companies make returning items difficult. Customers take it personally if the supply chain does not support their problems. In fact, in a survey conducted by a mobile network operator of 5,000 customers, 45 percent of respondents would not want to return their mobile device should there be an issue with it. Customers preferred a repair solution for their device for several reasons, including customization, data protection, and environmental impact.

Offering high-quality service would result in a positive customer care experience. This could also lead to a reduced return rate and generate significant savings. Impressed customers are more likely to return for future purchases.

Here's the catch: Based on a survey conducted by a large online retailer, customers don't like turning to OEMs directly when their device is defective. They prefer to turn to retailers and expect customer-friendly support. Retailers, on the other hand, are more interested in selling products than repairing them. Retailers simply take the defective devices and return them to the manufacturers or hook up to a slow, nonintegrated item collection and repair process organized by manufacturers. None of these scenarios are designed to make any of the parties involved happy.

How can this process be improved? Let's work backward, starting with the customer:

1. A customer has encountered a problem with his device and wants it fixed fast and professionally. Be it a smartphone, laptop, camera, or TV, customers feel they've paid a lot of money for their electronics and therefore should be able to use them.

2. Due to the wide range of products offered, it's difficult for retailers to provide in-depth employee training, which causes a problem when it comes to serving customers. Remote support is expensive and rarely available, but uninstalling the device and taking it to the store is time-consuming, especially when there is "no fault found" and the defect is simply that the customer did not understand how to use the device.

Since OEMs offer a much smaller range of products than retailers do, their service staffs are highly qualified, yet they are only remotely accessible. An OEM's goal is—similar to the retailer's—to avoid a customer return, as this is the most costly option. In order to eliminate any hassle with retailers regarding vendor return rights, OEMs are keen to contact customers directly.

Unfortunately, OEMs often do not provide integrated solutions with retailers. This is difficult to comprehend, as all three parties share the same goal: to fix the defect quickly and efficiently.

3. The question is why don't OEMs provide an integrated multichannel solution for all products globally? This standard could be used by retailers to immediately link the customer to the correct repair center, rather than slowing down the entire process by adding extra layers. And why don't OEMs encourage retailers to use the provided service structure, rather than having to renegotiate purchasing terms year-round to cover for return losses, which could be owing to poor quality or product complexity?

Ultimately, achieving success in the reverse logistics chain is not about making a profit. It's about impressing the customer with a point-blank problem resolution. This can only be provided with full cooperation between retailers and OEMs. This is what will remain in the customer's mind. And this is also what will differentiate the product from other OEMs or the offering from those of other retailers. This is a cash machine for the future.

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Wolf Mathias is the senior manager of solution design at B2X Care Solutions.

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