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Holiday returns can be profitable for businesses

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 the 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.

Date Published: 12/05/2002
Volume: 22   Number: 18

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