Returns – the scourge of e-commerce May 12, 2008Posted by jeremyliew in Ecommerce.
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.
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.