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Retail Industry Updates

Why Don’t Retailers Have a Chief Returns Officer? Perhaps It’s Time They Should

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(iStock/farakos)

It’s long been known as retail’s dirty little secret. But with the acceleration of e-commerce in 2020, product returns have finally emerged to the forefront of retailers’ minds as an issue that can’t be ignored. According to the National Retail Federation (NRF), last year saw returns total $428 billion. That’s 10% of total retail trade, and the industry is feeling the pain.

Most Retailers Do Not Fully Understand the Total Cost of Returns

Incisiv’s “2021 State of the Industry Report: Retail Returns” revealed that only 3% of retailers surveyed said their current return rates were optimal. The remaining retailers believed there was a significant opportunity to reduce return rates — by as much as 31%. While retailers know returns are a massive expense, most don’t have visibility into the full financial implications of returns on their business largely because returns are “baked” into the financial planning process. Retailers self-reported that this “baking in” is the No. 1 obstacle preventing them from reducing returns.

The full impact to a retail business can be astounding. Beyond the economic loss, returns significantly impact customer experience, brand value and even environmental sustainability. Product returns deserve ownership and can no longer be an afterthought.

Why Do Retailers Need a Chief Returns Officer?

Returns are an escalating, enterprise-wide problem that requires executive attention and commitment. Today, returns are typically managed in a siloed approach across multiple business areas. From product development to sourcing and customer service, each business area addresses returns in the context of its own department and usually with a limited view to the complete picture.

The opportunity to reduce returns is real. While customers return products for a variety of reasons, 73% of returns occur for reasons that are retailer-controllable. Yet, in most companies there is no single owner that coordinates and oversees the full return lifecycle (including returns reduction). In fact, only 22% of retailers say reducing returns is a strategic priority for their C-suite. The result: an environment where key data is siloed throughout the organization.

Retailers usually have all the data, but that data needs to be consolidated into a single version of the truth and transformed into actionable insights overseen by a chief returns officer. Returns reduction requires collaborative effort, and moving the organization forward requires ownership from the very top to both direct functional-area accountability and incentivize success. The financial rewards of returns reduction, even if returns are only reduced by 10%, more than justify the need for a chief returns officer.

So, What Would a Chief Returns Officer Do?

A chief returns officer would act with executive authority to support the broad C-suite goals of revenue growth, profitability, efficiency, customer loyalty, cost and resource optimization. This entails fashioning a shared vision across the organization that aligns with the objectives of senior management. This individual would be responsible for establishing returns strategy, cross-functional teams and the tools necessary to analyze, predict, correct and reduce returns.

First, the Tools

Bending the returns curve downward requires early identification of issues, root cause analysis, and prescribed actions to remedy in-season and upstream issues. This requires data. Right now, 77% of retailers have lots of data, but inadequate customer data on root cause return reasons. Therefore, the first task is to create a central platform from disparate sources that consolidates relevant data.

Sixty-eight percent of retailers say they have limited human resources to enact returns reduction efforts. Advancements in AI technology can empower retailers to automate, reduce human error, and accelerate productivity without added labor costs.

A Chief Returns Officer Would be, Above All, a Change Agent

A chief returns officer would place equal emphasis on proactive returns reduction and reactive measures to optimize the returns experience for customers. Reducing returns and improving the returns experience do not need to be mutually exclusive.

One innovative means to support this change would be enhancement of the traditional success measures of demand, sales and margin to include a new metric that measures supplier, product and customer performance based on the concept of the “Keep Factor.” This game-changing approach transforms the inherently negative conversation around returns to a positive, common goal focused on customers keeping their purchases. The underlying objective of the chief returns officer is to create a sustainable strategy based on the philosophy that “the best return is one that never has to happen.”

Navjit Bhasin is the founder and CEO of Newmine, a Southborough, Mass.-based firm that helps retailers and brands increase net sales and improve customer experience by reducing returns.

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