CCS In the News

CEA Meeting Puts Focus on Product-Return Woes

Published in TWICE
June 12, 2000

LOS ANGELES -- Product returns, the bane of the existence of manufacturers and retailers, was a prime topic at the Consumer Electronics Association (CEA) Business Solutions Series 2000 meeting held here last month.

The two-day meeting, which also covered e-commerce strategies, drew top retail, manufacturer and sales training executives to discuss ways to curb the problem.
CEA president Gary Shapiro was pleased to report there are fewer product returns now than in the early ’90s when the problem was first identified as being widespread. "Returns are the biggest cost for our industry," he said. "To quote [former Casio president] John McDonald, ‘In the U.S. there seems to be a constitutional right to returns.’"

In a roundtable called "Combating Returns Through Partnerships," executives from Target, Kmart, Sharp Electronics, Thomson Consumer Electronics and Genco Distribution Service described ways they have cut product returns.

Ira Miller, controller and financial planning director for Sharp, kicked off the discussion by saying, "Fifty to 75 percent of all product returns tested [by Sharp] found no product defect." Sharp has improved its owner’s manuals, improved product design for ease of use, and worked with its retailers to set up third-party screening of returns.

Tim Clark, customer service and distribution director of Thomson Consumer Electronics, said his company has made "major initiatives on product returns, developing a system to process, repair and re-market the products." Thomson took a business-unit approach, which included a full planning cycle, financial and operational metrics, and a monthly business review with senior management.

Frank Niglia, value-added services VP of Genco Distribution Services, outlined his firm’s Value Inspection Process (VIP) system, which he explained "determines returns eligibility. We bring product into our system to see if it [qualifies] as a return. We find out which individual stores have problems with returns and provide detailed shipping info for refurbishing."

The key is that Genco is a neutral middleman between participating retailers and manufacturers. Niglia said that under the typical retailer/vendor return process, "Both sides agree to disagree and lose time. With VIP we inspect based on existing policy, which speeds up credit consolidation and improves the relationship between retailers and manufacturers."

Other benefits include reduction of product handling, reduced accounting costs and reduced freight costs of "30, 40 or 50 percent" in some cases, Niglia said.

These findings not only contradict the aforementioned myth; they also represent very good news. Sales associates play an extremely important role in the overall success of a product at retail. Because they are the gatekeepers of vital product information for users, retail sales people are the single most influential factor in consumer buying.

"Retail sales associates are the most valuable resource for manufacturers - these individuals directly influence consumers’ purchasing decisions," says Gary Shapiro, president of the Consumer Electronics Manufacturers Association. "Today’s ultra-competitive marketplace requires manufacturers to develop a strategic focus in this area - by providing consistent product training and education to the sales people."

This is the human side of retailing - the effectiveness of person-to-person contact is unmatched. The same is true when it comes to providing these individuals with retail training. The best way for a manufacturer to reach a retail sales associate is direct, face-to-face communication. For example, several leading manufacturers have a network of field representatives that canvass key accounts across the country, and provide sessions at the store level. This process is effective for creating awareness and developing individual relationships with their accounts. The downside of course, is the economic ramifications attached to supporting the necessary bandwidth to make these programs effective. How to provide vendor training on a regular basis, fulfilling the need for product and sales training to a large audience across the country?