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Returns – the scourge of e-commerce May 12, 2008

Posted by jeremyliew in Ecommerce.
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The WSJ had an interesting article last week about how some consumer electronics companies were working to reduce return rates:

The U.S. electronics industry last year spent about $13.8 billion to re-box, restock and resell returned products, according to a study by technology consultant Accenture Ltd. Especially galling to manufacturers is that many returns are preventable: Only about 5% of returns were because a product was truly defective. Instead, most consumers give up on products for other reasons, such as the device being too confusing to use, the study found.

WSJ

Return rates are even higher in apparel and shoe retailing than in electronics; in some cases return rates are in the 20-30% range.

The good news is that companies are addressing returns in consumer friendly ways, rather than by trying to penalize consumers. One great example is Sony:

Sony Corp. has taken a different approach with some of its products that makes it harder for consumers to bring them back. The company in 2006 added an option allowing consumers to engrave their name or other message on a Vaio computer. It expanded the program to its digital cameras last year. Sony says the program was started to let customers personalize products, but a side benefit for Sony is that engraved products can be returned only because of defects or other reasons that are the company’s fault.

Return rates on engraved Sony Vaios are negligible, compared with about 5% for non-engraved PCs, the company says, saving more than $1 million so far. “I have a feeling that people are understanding the condition that you can’t return it,” Mr. Abary says. “But also once they have engraved it, they feel like it’s a part of them.”

I thought that this was a very clever approach.

Comments»

1. kevin - May 12, 2008

i think what sony’s doing is pretty smart, but you have to wonder about long-term consumer loyalty. if i bot an engraved vaio laptop w/o realizing the defects-only return policy and had a change of heart, i’d feel a little taken by sony…and would probably be more suspicious of future purchases with them.

i’m willing to bet a large portion of that 5% difference is consumers who didn’t know about the no-defect only policy…and would assume the lifetime value lost of those disappointed/upset customers is significant (altho who knows how large)

2. Uh - May 12, 2008

a little sleazy, and I doubt engraved pc numbers are significant.

3. pat - May 13, 2008

so lets see — instead of making the product easier to use, companies should just make it harder to return? Interesting concept.

4. Just wondering…. » Blog Archive » the “anti seth godin” approach to selling products - May 13, 2008

[…] Lightspeed venture partners comments that 11-20% of electronic gear is returned. […]

5. Parry - May 13, 2008

I guess most of the goods that allow for engraving have engraving as an optional feature. If a consumer is not sure if he really wants the product but would try it out w/o any strings attached, he can simply skip the engraving option.

6. EPORIA - May 22, 2008

As for Sony not taking back engraved items because someone has changed their mind and wants a refund makes sense. It isn’t common anywhere for “customized” products to be returnable.

7. Alan - June 9, 2008

I wonder if there’s an opportunity for a no-returns-allowed ecommerce site?

In the approaching 12 years that I have used Amazon.com, I have purchased hundreds of items, and never returned anything.

I feel I am subsidizing the returners.

If such a site existed, it could presumably offer lower prices, attracting people like me.


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