Solving the Post-Holiday Revenue Shortfall By Turning Returns Into Sales

By Tom Rittman, vice president of marketing, The Retail Equation
It’s no secret that the slumping economy is having an affect on consumer spending – a trend that will undoubtedly continue through the post-holiday shopping season. And what sales boosts a retailer does get may be overshadowed by the challenge of managing returns after the holidays. Now is the time for retailers to maximize the revenue potential from every customer transaction, and there is a light at the end of the seasonal shopping tunnel: Customer returns may hold the key to reducing retail revenue shortfall.

Some companies have embraced the attitude of “If a customer is already here in the store and has return money in hand, waiting to be spent, why shouldn’t it be spent here?” Retailers have a unique opportunity to reinvent the return desk by utilizing “return optimization,” turning the point of return into a profitable sale and boosting customer loyalty in the process by creating a positive return experience and incentive to continue shopping.

Retailers who have optimized their return transactions have achieved revenue lift by issuing intelligent incentives following legitimate returns and exchanges – and increased customer conversions while reducing fraud and abuse, resulting in incremental sales increases of more than 1%. Implementing incentives could spell about a $4 million increase for, say, a $1 billion retailer.

Dos and Don’ts to successfully maximize post-holiday revenues:

  • Don’t underestimate the importance of proper staffing – Make sure employees know company return policies and clearly communicate them to customers. In addition, printing policies on store receipts and well-placed signage will prevent misunderstandings.
  • Do supply return customers with a reason to keep shopping – Programs the incentive customers with returns can facilitate significant incremental sales at the point of return and build customer loyalty by using a customer’s return information to instantly customize a coupon for that particular person and keep them shopping.
  • Don’t ignore the impact of return policies on consumers – Be aware of how the processing of returns can impact relationships with customers. Long lines and cumbersome return policies do little to assuage crowd tensions, voiding out any positive first impressions made at the initial sale.
  • Do prevent customer return fraud as it occurs – Return authorization software can use a customer’s driver’s license to identify their unique return behavior, tracking how frequently they return items and the dollar amounts of past returns. Since less than 2%of consumers are responsible for fraudulent or abusive returns, the software protects honest customers with more flexible return policies.
Tom Rittman is vice president of marketing of The Retail Equation, a leader in retail transaction optimization solutions. The company’s applications use statistical modeling and analytics to predict consumer behavior, and its SaaS delivery enables retailers to achieve measurable ROI. Its solutions are operating in over 12,000 stores in North America, supporting a diverse retail base of specialty, department, sporting goods, auto parts and more.