Returning Customers: The Hidden Strategic Opportunity of Returns Management

Abstract

Product returns are both a challenge and an opportunity for most retailers, since more than US$640 billion in revenue is lost each year because of preventable product returns. A major impediment to unlocking the full potential of these returns is the firm’s returns management program: the policies governing the customer-firm exchange process. Recent insights from research and practice have yielded the unprecedented opportunity to open the “black box” of developing effective programs. Yet, such development must address three main questions: What types of returns management programs exist? What misunderstandings impede returns management effectiveness? How can retailers develop effective programs? This article distinguishes among different types of returns management programs and discusses the managerial misunderstandings that reduce their effectiveness. It presents a framework for developing, implementing, and controlling effective programs that allow retailers to boost sales, reduce returns, and increase profitability.