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How Should Enterprises Cope With High Return Cost?

2014/6/24 16:13:00 14

Enterprise Return Cost Management Skills

how to deal with high return cost?

in traditional business practice, the expected sales return is often considered in the cost of the current period when the sales forecast is carried out. This management method is easy to underestimate and neglect the cost of return.

According to Accenture's performance excellence research, the consumer electronics industry in the United States has generated high costs due to return, accounting for about 9% of the total shipments of the industry.

In this industry with a very small profit, "customer experience" has become a key factor for enterprises to stand out from the fierce competition. This is not only a financial problem, but also a threat to the growth of future enterprises.

If we take a positive and effective way to avoid the problem of customer returns and improve the processing flow of returns from the source, enterprises will be able to surpass their competitors and significantly improve their profits and achieve excellent performance.

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according to the American Consumer Electronics Association, in 2013 alone, the total value of consumer electronics shipments reached US $202 billion 800 million in the US alone.

According to Accenture's performance excellence research, the cost of return from the whole industry accounts for about 9% of the total value of the industry's shipments.

Globally, the losses caused by returns will be even more alarming.

Research shows that the total cost of return is about 5-6% of manufacturer's income and 2-3% of retailer's sales income.

Accenture's research found that most businesses in the consumer electronics industry are not very concerned about the cost of return, and enterprises that are trying to take various measures and hope to reduce the cost of return as much as possible are few and far between.

As shown in Figure 1, for typical consumer electronics enterprises, only the warranty and maintenance costs (about 29% of the total return cost) are included in the relevant cost of the product return.

"P > Accenture estimates that the average return rate of consumer electronics is between 11% and 20%, as shown in Figure 2. In all returns, more than 2/3 (68%) are flawless products (NTF), that is, the equipment meets the manufacturer's standards, but it does not meet the expectations of end users.

The proportion of returned goods was 27% because of "buyer's regret".

Only 5% of the equipment returned due to equipment malfunction or defects.

In the total cost of return, the defective products accounted for 20%.

If manufacturers and retailers can reconsider the existing solution to return problems and reduce the proportion and impact of NTF and buyer's return, they will significantly reduce the loss of profits.

Accenture's scenario analysis shows that the NTF return rate is reduced by 1%, and the return and maintenance costs of retailers and manufacturers will be reduced by about 4%. For large consumer electronics retailers, it will save about 1% of the cost.

The seriousness of the "P" return problem is that once the product is returned, the enterprise will face a huge customer loyalty cost.

For example, some of the previous studies have shown that:

if there is a return, more than 60% of the returns will take place within two weeks after the purchase.

25% of the users who choose to return products for whatever reason are no longer buying this brand product.

the cost of winning new customers is five to seven times the cost of retaining existing customers.

therefore, the "loyalty factor" brought about by quality products and good brand experience may be more important than the cost savings brought by reducing the cost of return, and can bring more benefits to enterprises.

based on the total cost of returns and the hidden costs related to customer loyalty, enterprises should improve the return problem as an ordinary business approach.

By reformulating the return strategy, consumer electronics companies will closely cooperate with manufacturers and retailers, effectively improving the return rate, significantly improving profitability and customer satisfaction, and promoting shareholder value growth.

return prevention and return processing

a comprehensive solution to the problem of return, enterprises need to pay attention to the two links of return prevention and return processing.

Return prevention helps enterprises to reduce NTF return ratio, seize competitive opportunities, and ensure customers enjoy more satisfied experience when using products.

In addition, through reconsideration of the return process, enterprises can also significantly improve their performance.

Accenture research finds that there are still many unused spaces in the existing network of return and maintenance.

Because we can not completely eliminate the return, enterprises need to deal with returns more skillfully, and seize the opportunity to cut costs.

Accenture has made a series of strategic recommendations for the prevention and handling of returns by studying the return practice of consumer a href= "//www.sjfzxm.com/news/index_c.asp" > electronic products < /a > manufacturers and retailers.

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for manufacturers, the following return management practices can significantly reduce the cost of return:

measure the impact of returns.

Manufacturers should set up a benchmark to check all costs and processes related to the return of equipment to assess the impact of returns.

For example, manufacturers need to know the cost of receiving, handling and disposing defective products.

improve product design.

User friendly product experience can reduce the probability of customer returns.

A recent survey found that consumers try to use one device for nearly 20 minutes, and they often choose to give up and return products once they exceed and fail to meet customer expectations.

Therefore, manufacturers must adopt some tools (such as hunting field model) and strategy to determine users' functions that they really like and need and make them friendly.

strengthening customer education.

Manufacturers can strengthen the training of retail specialists, or arrange business personnel in retail stores to enhance product promotion in retail.

There is more room for online work, such as training investment for online shopping customers, providing remote diagnosis and maintenance services, and launching active online community forums.

In particular, enterprises should pay attention to customers who issue inquiries for the first time, handle customer needs with caution, and enhance the experience of instant access.

consumer electronics retailers and communication operators can also take preventive measures to solve the return problem:

measure the impact of returns.

Retailers, like manufacturers, should have a set of tracking standards and methods for returns.

Retailers should measure returns according to product, product category, manufacturer, purchase and return, and return reason.

For NTF returns, it is especially necessary to record detailed indicators on the return reason.

provide delivery and installation services.

For high-tech products, retailers' close home service can not only reduce the return rate but also bring considerable service benefits.

to contact customers on the second day of purchase.

By paying attention to customers buying products, retailers can not only avoid potential problems in use, but also enhance the brand image of customers.

make use of big data analysis to identify customers who often return products.

Some retailers use the return database to track returns and lock out customers with high return rates, so that they no longer have a loose return and warranty policy.

At the same time, enterprises will find the most valuable customers and reward them to improve customer loyalty.