2019

PROGRESS REPORT

SERVICE

Getting A Second Chance

The hidden world of retail returns

We’ve all been there: Standing in line at the service counter of your local retailer, waiting to return something you ordered or bought that you no longer want. After issuing your refund and mechanically asking a question or two, the cashier tosses your item on top of a pile of other returns to be re-shelved and resold. Right? Wrong.

Contrary to popular belief, about half of the products we return aren’t restocked.1

“A lot of people think that when they return something, it’ll go straight back on sale,” said Vicky Brock, CEO of Clear Returns, a returns intelligence platform. “But it may never get back on sale—by the time it’s been sent back to distribution, repackaged, if it’s in a condition for sale, it could have been discontinued or discounted. In some cases, it’ll just get shredded.”2

If only half of returned items are restocked, what happens to the other half? Often, the items are auctioned off to a secondary market at a steep discount. Amazon, for example, sells returned items by the pallet-load to liquidation organizations. Assuming the products are new and pristine, the pallet might be valued at $4,000, but sold for only $200.3

“If it sounds crazy to sell products at massive discounts, consider that goods sitting in a warehouse are a cost,” said Alexis C. Madrigal, a staff writer for The Atlantic. “So is the labor necessary to repackage something for resale. If Amazon and other retailers let another company pay them something, they avoid those costs and add some revenue.”4

Factory outlets and dollar stores also purchase returned goods in bulk, culling the good items to resell at their brick-and-mortar stores. And over the past decade or so, sales like this have doubled, while online auction sales have increased by about 66%.5 This process has been dubbed the “reverse supply chain.”

But sometimes, it’s cheaper for retailers to just throw away the items—which is why each year, more than 4 billion pounds of clothing ends up in landfills. That’s about equal to every family in the United States doing a load of laundry and then throwing it away.6

The effect

According to a report by Appriss Retail, retail industry sales reached $3.688 trillion in 2018. About 10% of that was returned.7 And while returns may seem like no big deal, they cost retailers some serious cash.

“Total merchandise returns account for nearly $369 billion in lost sales for U.S. retailers,” the report said. “This is close to the market cap value of Facebook.”8

Returns also increase labor costs because retailers must pay their staff to inspect and re-stock some of the items. When you throw return fraud and abuse into the mix, the numbers are even more staggering. Appriss Retail estimates that retail fraud and abuse cost the U.S. retail industry $24 billion each year.9

Mitigating costs

Things weren't always this bad. In the past, retailers had much stricter return policies—until the online shopping boom, that is. With the convenience of 24/7 shopping and same-day delivery, brick-and-mortar retailers must offer incentives, such as hassle-free returns, to keep customers happy. But while hassle-free returns may be boosting customer satisfaction, it’s hurting retailers.

“Retailers face a major challenge,” said writer Lindsay Boyajian. “Consumers expect free returns, and inconvenient returns deter 80% of shoppers, according to a ComScore study. However, retailers are struggling to offer this because they can’t absorb the cost into their bottom line.”10

For example, in 2014, Amazon spent $6.6 billion on shipping, but it received only $3.1 billion in shipping fees.11 But as Boyajian mentions, shoppers shy away from inconvenient returns. So retailers must be careful about how they mitigate those costs and improve the reverse supply chain.

“For instance, brick-and-mortar retailers with online shops are now offering in-store returns,” Boyajian said. “Sixty-two percent of shoppers are more likely to shop online if they can return product in-store. This policy not only reduces shipping and handling return costs for retailers, but it also drives shoppers to the store. Once inside, shoppers can be engaged and enticed to make additional purchases.”12

Other retailers are focusing on minimizing returns—and squeezing out costs—by selling the right products to the right people in the first place. To do this, some are using technology, such as augmented reality, so online shoppers can “experience” products before buying them.

“By refining the earlier stages of [the] buyer’s shopping journey, you will have customers who are less likely to return your products, resulting in lower costs,” said Boyajian.13

Still others are making the return process more efficient. On average, it takes more than two weeks for an online retailer to credit a return because the return process is too manual.14 Peter Sobotta, founder and CEO of Return Logic, said the return process is a great opportunity for retailers to enhance customer service by adopting more liberal return policies, implementing automated return management software and keeping track of who returned products, what was returned and why.

“Consumers care far more about product returns than retailers seem to think,” Sobotta said. “Implementing effective returns processes pays off in a better brand experience, both in short-term customer satisfaction and in long-term improvements to understanding and servicing customers.”15

—compiled by Lindsay Dal Porto, assistant editor

References

  1. Erica E. Phillips, “What Stores Do With $90 Billion in Merchandise Returns,” Wall Street Journal, Feb. 16, 2018, https://tinyurl.com/y5w6hjke.
  2. Kim Bhasin, “Here's What Happens to a Product After You Return it to the Store,” Business Insider, Jan. 2, 2013, https://tinyurl.com/y4p933s9.
  3. Alexis C. Madrigal , “Where Amazon Returns Go to Be Resold by Hustlers,” The Atlantic, Jan. 23, 2019, https://tinyurl.com/y9mxs4v3.
  4. Ibid.
  5. Phillips, “What Stores Do With $90 Billion in Merchandise Returns,” see reference 1.
  6. Brittain Ladd, “The Retail Industry Has a Problem With Returns: ReturnRunners Wants to Be the Solution,” Forbes, Dec. 19, 2018, https://tinyurl.com/y3kvdue2.
  7. “2018 Consumer Returns in the Retail Industry” Appriss Retail, December 2018, https://tinyurl.com/y666a37b.
  8. Ibid.
  9. Ibid.
  10. Lindsay Boyajian, “The Real Cost of Returns for Retailers,” RetailNext, https://tinyurl.com/y6xkdy8y.
  11. Ibid.
  12. Ibid.
  13. Ibid.
  14. Peter Sobotta, “Improve Management of Retail Returns for a Better Customer Experience,” Entrepreneur, Jan. 19, 2016, www.entrepreneur.com/article/254597.
  15. Ibid.

News Briefs

FSMA Accreditation Reaches Milestone

The first ANAB accreditation based on ISO/IEC 17021-1 under the U.S. Food and Drug Administration’s Food Safety Modernization Act (FSMA) Accredited Third-Party Certification Program has been issued to LSQA Social Accountability (SA), a certification body based in Montevideo, Uruguay.

LSQA SA is now approved to audit and issue FSMA certifications. For more details, visit www.anab.org/latest-news/lsqa-fsma-accreditation.

June 9 Marks Accreditation Day

“Accreditation: Adding Value to Supply Chains” is the theme of this year’s World Accreditation Day on June 9.

World Accreditation Day is a global initiative established by the International Laboratory Accreditation Cooperation and the International Accreditation Forum to raise awareness of the importance of accreditation. The event will be celebrated with national events, seminars and media coverage around the globe, providing the opportunity to explore how accreditation can help deliver a safer world and support businesses, government and regulators seeking standards, conformity assessment and accreditation tools.

For more details about the celebration and to download posters and brochures, visit https://ilac.org/news-and-events/world-accreditation-day-2019/.


ASQ

Membership Structure Reorganized

To enhance member value, ASQ has restructured its individual membership model.

The new model, which goes into effect on July 1, will include two individual membership choices: professional and student.

Professional membership will increase members’ opportunities for knowledge and skill development, peer networking and career advancement. These members will receive expanded access to all the tools, resources and content developed by thought leaders and subject matter experts across 26 industry and interest-specific technical committees. There also will be expanded access to all divisions and forums at no extra cost.

All ASQ members will receive formal notifications of the changes before any change occurs in their own membership status. In addition, the associate member classification has been discontinued.

Existing associate and full members will be transitioned to professional membership at their renewal date beginning on July 1. Advanced memberships will be referred to as “senior professional” and “fellow professional.” Additional benefit options for these memberships include adding either one section membership or one journal subscription.


HEALTHCARE

Report on Drug Abuse in Healthcare Prompts Advisory

A recent report estimating that 10% of healthcare workers abuse drugs—a serious potential threat to patient safety—has prompted the Joint Commission to issue an advisory to healthcare organizations to establish comprehensive controlled substance abuse prevention programs.

The report by the U.S. Substance Abuse and Mental Health Services Administration and the American Nurses Association warns that the availability and access to medications in healthcare organizations can make it difficult to detect and prevent drug abuse. Patient risk from drug abuse includes inadequate pain relief and exposure to infectious diseases from contaminated needles and drugs, as well as potentially unsafe care due to a healthcare worker’s impaired performance. 

For more on the advisory, visit https://tinyurl.com/joint-comm-advisory.


Quality-related news from around the world

—Powered by LexisNexis

Car Manufacturers Get Thinking Outside of the Box for Gen Z

Industries worldwide are scrambling to crack the enigma of Gen Z. Gen Zers are driven by radically different impulses. For organizations, that means a reassessment of long-established rules of customer engagement. So, who is Gen Z, what do its members want and how does the auto industry stack up? Find out at: https://tinyurl.com/gen-z-auto.

Amazon Delivers Packages Out of ‘Carnival’ Tents in Race to Compete

Amazon is operating out of giant tents in cities across the United States as it races to expand its delivery network to supplement and compete with UPS, FedEx and USPS. The structures serve as delivery stations, which is Amazon’s term for the facilities that house packages until the last leg of their journey. Read the full story here: https://tinyurl.com/amazon-delivery-tents.

Experts Tell Device Organizations Not to Fret Over QMS Transition

Ahead of the proposed shift away from the current FDA QMS regulation toward ISO 13485:2016, a new white paper sheds light on how the action will impact medical device development, identifying three interrelated principles that will define the direction of the FDA’s process after the transition. For more information, visit: https://tinyurl.com/medical-device-qms.

To get a roundup of the week’s most noteworthy stories delivered to your inbox every Friday, subscribe to the QNT Weekly enewsletter at asq.org/newsletters.


Getting to Know…

Ashley Hatfield

Current position: Validation engineer at American Regent, Columbus, OH.

Education: Bachelor of science degree in packaging, Michigan State University (MSU), East Lansing.

What was your introduction to quality? I studied quality at MSU through several of my packaging courses, but consider my first job as my real introduction to quality. Amy Wendling was the senior director of quality at Accel Inc., and I was so fortunate she was willing to teach and expose me to quality (and to ASQ!) in such an immersive and supportive way. She shared her own experiences and knowledge and taught me firsthand what being a quality professional meant. She sparked an interest, and a passion I didn’t know I had.

Do you have a mentor who made a difference in your career? I am fortunate to have many people in my professional circle who have supported, encouraged and offered advice to me over the past few years, especially within the ASQ Columbus Section. Several of my fellow member leaders encouraged me to sit for the ASQ certified quality auditor exam even before I was eligible to take it because they said it would help me in my career, which I can now proudly announce that I have officially passed.

What’s the best career advice you’ve ever received? Never present a problem without a solution.

Have you had any previous jobs you consider noteworthy? In my first job, I worked for a contract manufacturer and was exposed to many different industries—from medical devices to health and beauty. Even as a packaging engineer, I had opportunities to gain experience and knowledge in additional areas of the business, such as product development and quality. I was even part of the implementation team for the organization’s first ISO 9001 certification.

Are you active in ASQ? I currently serve as chair and internet liaison for the ASQ Columbus Section. I’m also active on the section’s education committee, the spring conference committee and the affordable quality management system audit committee. I also serve as an ASQ section representative, and the ASQ World Conference on Quality and Improvement (WCQI) 2020 site committee co-chair.

What are your favorite ways to relax? Playing volleyball or basketball, working out, being artsy (drawing, photography, painting, rehabbing furniture and dancing). And, of course, driving my bright red Mustang convertible.

Is there anyone you follow on social media that you would recommend to others? Why? I started following Mel Robbins after she spoke at last year’s WCQI. I appreciate her straightforward, science-supported approach to improving your mindset in a variety of areas, and suggestions on how to create the changes in your life you’d like to achieve.


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