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Happy Holidays, Happy Returns

12/03/2002

No period is worse for product returns than the holidays.

But returns - now estimated to exceed $100 billion annually in the United States - are an increasing burden year-round not just for retailers, but for almost every company that makes and sells a product.

“There are lots of reasons for this trend - the rise in electronic retailing, the increase in catalog purchases, more self-service in stores,” says Thomas Speh, associate dean of Miami University’s Richard T. Farmer School of Business and co-author of a recent article on returns in the Harvard Business Review.

“When U.S. consumers return goods each year whose total exceeds the GDP (gross domestic product) of two-thirds of the world’s countries, it’s time to pay attention to the issue,” says the Miami business professor.

Although many companies view product returns as a costly nuisance, some savvy businesses are making the process profitable, says Speh.

What does it take to recast a backwater operation like returns processing into a profit center? Speh and co-authors James Stock of the University of South Florida (Tampa) and Herbert Shear, chairman and CEO of Genco Distribution System (Pittsburgh), outline three steps:

  • Give returns handling its own turf.

  • Treat returned goods as goods for sale.

  • Design efficient routes for returned products.

Companies that are leaders in dealing with returns, according to Speh, include Sears, Estee Lauder, eBags and Roadrunner Sports.

Speh is president of the Council of Logistics Management and co-author of a leading textbook on business-to-business marketing.

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