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Happy returns translate into more sales

January 1, 2017

It is peak season again for merchandise returns, which means that brick-and-mortar and online shoppers alike are flocking to the malls to try and remedy some of those millions of yearly holiday gift-buying miscalculations. Though this translates to aching heads and sore feet for store employees, it also furnishes wonderful opportunities for malls and merchants to leverage all that traffic into such things as add-on sales, consumer data-gathering and just plain goodwill-building, observers say.

“For retailers it’s an opportunity to make the customer feel desired and to up-sell with matching accessories and other complementary merchandise,” said Karen Raquet, executive vice president and director of national property services for retail at JLL. It also is a chance for them to impress online shoppers — who tend to return purchases to stores to avoid the hassles of return shipping — “with a positive experience that will keep them coming back,” Raquet said. About 60 percent of cybershoppers prefer to return items to a physical store, and 70 percent of those shoppers will make additional purchases while they are there, according to a UPS study conducted last year.

Malls, for their part, can keep their presentations fresh and offer such little surprises as gift-card giveaways, free coat-check and assistance with carrying packages out to the car, Raquet says. “Malls really can’t control what goes on in the lease line, but they can always improve on the small things and create an upbeat environment,” she said. Even such niceties as providing free refreshments to shopping center workers will translate into better morale and more-energetic customer service, she points out.

Shopping centers that offer free Wi-Fi can tantalize shoppers returning merchandise by texting them discount offers, suggests Daniel Wagstaff, CEO of Pocketstop, a firm with headquarters in Dallas that provides a cloud-based mass-notification system. By capturing customer cellphone numbers in the process, shopping centers and retailers can build customer-consumption profiles that will be useful in future marketing, says Wagstaff, who cites ICSC consumer research that demonstrates free Wi-Fi is a highly desired mall service, at a 70 percent response rate. “Whether returning gifts or looking for sales, the one thing every customer has in common when arriving at the mall is a cellphone within arm’s reach,” he said.

One startup that is actually helping take some of the pain out of the merchandise-returns process is Venice, Calif.–based Happy Returns, which has set up 10-by-12-foot kiosks that it calls Return Bars, adjacent to the mall concierges at a half dozen U.S. shopping centers. At these kiosks the firm reimburses credit purchases on the spot and stows away returned items at a secure storage space nearby. The first of these Happy Returns units opened last April at Macerich’s Santa Monica Place, and that was followed by two more in the fall at Westfield centers: Westfield Topanga, in Canoga Park, Calif., and Westfield San Francisco. 

Last month three more Happy Returns kiosks were introduced at Macerich centers: Fashion Outlets of Chicago; The Shops at North Bridge, on Chicago’s Michigan Avenue; and Tysons Corner Center, in Virginia. “This is smart positioning for us and our retail partners,” said Ken Volk, chief marketing officer for Macerich. “More and more, our high-performing properties are becoming centers for innovative omni-channel ideas.” Online retailers participating in the Happy Returns program include Eloquii, Machines for Freedom, RibbedTee, Shoes of Prey and Tradesy.

Internet shoppers dislike the inconsistencies involved in online returns policies and also the chore of finding a shipping box and printing the mailing labels, according to David Sobie, co-founder and CEO of Happy Returns. Sobie was an executive at HauteLook, where he helped its parent company, Nordstrom, build an in-store returns program for merchandise that had been bought online. “We are creating new reasons for online shoppers to come back to the mall, and not only that — it is high-quality foot traffic,” Sobie said. Retailers save on shipping because the service aggregates return items before mailing, and they also save on labor costs because workers field fewer customer-service calls. 

Through their databases, the kiosk personnel confirm the original purchase, help retailers determine the reason for the return and then ascertain how the customer prefers to be refunded — store or credit-card crediting only, no cash. Retailers, in turn, can choose to have the returned item sent back into inventory or to let the mall store liquidate it. “A retailer might tell us not to send back swimsuits after August,” said Sobie.

By any measure, it is vital for retailers to make returns as painless as possible, according to consumer psychologist Kit Yarrow, professor emeritus at Golden Gate University, San Francisco, and author of Decoding the New Consumer Mind: How and Why We Shop and Buy. “One recurring comment I hear is that staff is nice when you’re buying, but not so nice when you return,” she said. Data show that there is still significant room for improvement: Only 36 percent of shoppers returning online-purchased items to a store said they had encountered helpful sales associates there, according to the UPS survey. Returns fraud, which the National Retail Federation says costs retailers up to $15.9 billion annually, is slowly being reined in by enhanced security technology, according to Yarrow, “and that has enabled retailers to relax their policies and extend their return windows.” 

A post-Christmas return “is a huge opportunity to re-engage mall shoppers when they are in a renewal mindset, so malls need to refresh and reflect change to become more engaging and exciting,” Yarrow said. “Most importantly, [stores] need to give them less-cumbersome experiences with fewer hassles.” Yarrow says her shopper interviews reveal that customers who return a lot of merchandise also tend to buy a lot of merchandise, and across every category. Shoppers “tend to be aggravated by offers of store credit, so gift cards are preferable,” she said.

Retailers — and, by default, their percentage-rent-collecting owners — tend to take a beating on returns. The typical retailer spends an average of 8.1 percent of total sales on reverse logistics that include taking back unwanted, damaged, spoiled or counterfeit goods, according to Inbound Logistics, a trade publication. Some of those losses occur because there is no uniform method of determining why products are coming back, says Peter Sobotta, founder and CEO of Carlisle, Pa.–based Return Logic, a technology startup that enables retailers to optimize merchandise returns. Such “returns data” help retailers identify problems in the supply chain and the like, Sobotta says. Basic analytics can help uncover such things as a stock of navy-blue shirts that get errantly placed in a warehouse bin for black shirts; apparel sizing that runs unusually small or large, owing to manufacturer errors; drawstrings missing from an entire shipment of shorts or sweatpants; or fabric that is too scratchy, he says. 

One of Return Logic’s specialties is providing assistance to determine where returned items should be sent after they come in. “Stores aren’t particularly equipped to receive returns,” Sobotta observed. “They may have a spot for returns in their store-clearance area where they lump them together. But that’s not always the best place for them.” 

A retailer doing about $100 million in annual sales with an average merchandise-returns rate of 10 percent
($10 million) typically recovers only about 30 percent of that, or
$3 million, Sobotta says. But through understanding why returns are made and improving on the logistics, that same retailer can typically recapture at least an additional 1 percent, which goes back to the bottom line, he says. “The problem is, a lot of retailers are completely blind to this process, which is staggeringly big in its potential for helping them.”

Whatever the returns process, retailers need to show concern for customers returning items, without coming across as patronizing, Raquet says. Navigating crowded store aisles can be intimidating to some customers, but a well-trained returns person will pick up on that and call in an associate to assist them, she says. 

“So much of what we do is digital,” Raquet said. “But we have to remember that the mall should always be about the experience and [about] that positive human connection.”