Service Innovation Needed to Reduce the $17 Billion Product Returns

A new research by Accenture finds that customers returning electronic devices will cost U.S. electronics retailers and manufacturers about $17 billion this year, an increase of about 21% from 2007. These costs include receiving, assessing, repairing, reboxing, restocking and reselling returned products.

The press release by Accenture reports:

“The research is based in part on a survey of executives from communications carriers, consumer electronics retailing and consumer electronics manufacturing companies, which revealed that product return rates over the past three to five years have increased for more than half of the retailers (57 percent) and nearly half (43 percent) of the manufacturers surveyed.  Only 13 percent of the retailers and 12 percent of the manufacturers surveyed indicated that return rates are trending downward.”

Significant opportunity for the industry

Accenture’s new published report, titled “A Returning Problem: Reducing the Quantity and Cost of Product Returns in Consumer Electronics, revealed a significant opportunity for the industry to cut costs and reduce the level of product returns, given that only 5 percent of returns are related to actual product defects.

“While 27 percent reflect “buyer’s remorse,” 68 percent of returned products ultimately are characterized as “No Trouble Found.” This means that, despite the customer perceiving a fault, no problem was detected when the item was tested against specifications set by retailers or manufacturers.”

Mitch Cline, managing director of Accenture’s Electronics & High-Tech group said:

“These high consumer electronics return rates are unsustainable in a sector with brutal competition and thin margins. Manufacturers and retailers should do more to differentiate their customer service by helping consumers understand, set up, use and optimize the products they purchase. Most compan­ies invest considerable sums to manage returns, but need to refocus their strategies on proactively preventing returns through customer education and aftermarket support.”

Janet Hoffman, managing director of Accenture’s Retail practice said:

“In this volatile and fast-moving sector, retailers should establish the right technologies and processes to deal with these big-ticket item returns to improve the customer experience and achieve measurable and sustainable bottom-line benefits.”

Service innovation to meet customer needs

The two remarks by Accenture that stand out and offers the opportunity for service innovation, are “proactively preventing returns through customer education and aftermarket support” and “to improve the customer experience and achieve measurable and sustainable bottom-line benefits”.

It would be interested to understand what these organizations have done in the realm of peer-to-peer (P2P) communities, user generated help fora or guidelines and crowdsourcing the solution for the perceived problems.

Opening up customer service and aftermarket support has been proven successful in other cases, think of GiffGaff. The challenge is how customers can help other customers through a provided and facilitated platform by the organization.

Not only does this “horizontalist” (P2P) approach achieves support and service, it also enhances the customer experience, where once again the horizontal effect, where customers put more trust into other customers than brands (Kotler, Marketing 3.0). Customers can more easily relate to each other because they are in a ‘similar’ situation.

In this article is also explained the reasons why people want to participate and therefore being a reciprocal collaboration between customers and brands.

Scalability

Opening up the processes for external participation improves scalability in this type market as well. It’s not always easy to understand the problem, hence the 68% of “No Trouble Found”. Cost-effectiveness and sustainability are being enhanced by external participation without affecting the ‘platform’ and therefore is agile in execution and usage.

What are your thoughts on this challenge? How can retailers make use of the crowd or any other way to benefit from this opportunity?

By Gianluigi Cuccureddu

About the author:

 

Gianluigi CuccuredduGianluigi Cuccureddu, contributing editor, is an experienced writer specializing in innovation, open business, new media and marketing. He is also Managing Partner of the 90:10 Group, a global Open Business consultancy, which helps clients open their activity directly and indirectly to external stakeholders through the use of social media, its data and technologies for the purpose of competitive advantages in marketing, service- and product innovation.

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