JCrew Automates Returns To Save MoneyJCrew Automates Returns To Save Money

Retailers have two ways they can reduce the cost of handling all those holiday purchases that shoppers return: give out fewer refunds or try to automate the process. A growing number of catalog and Web merchants are choosing the latter.

JCrew Inc. will say Monday that it will begin using a new logistics system designed to expedite the handling of returned items. Created by startup Newgistics Inc., the ReturnValet system provides bar-coded mailing labels for shoppers to place on their return shipments. It also offers software, as well as shipping, warehouse, and liquidation services, for retailers. Catalogers Lillian Vernon and the Spiegel Group--which includes Eddie Bauer and Spiegel--also use ReturnValet.

Retailers could save 73% on the cost of returns if they automated the process, says Geri Spieler, research director at Gartner G2. "Retailers are cheap and don't want to admit it's [the job of processing returns] a problem. It's expensive, it's a pain in the neck. They're in the business of selling stuff, not in taking it back."

With the Return Valet system, shoppers receive a preauthorized United States Postal Service label with their order. Should they wish to return it, they can do so at independently owned mail and parcel centers such as Pak Mail or Post Net, which scan the label and transmit the information via an ISP back to a retailer's warehouse. There, the company has a better idea of the volume of returns to expect. "The key to efficiency on the back end is having advance notification. They've never had that before," says Ed Stashluk, VP of technology at Newgistics. The system, with an XML interface, also ties into a retailer's credit mechanisms and financial systems to let them give consumers refunds more quickly.

Somebody still has to physically open the box and look inside, however. Lillian Vernon, which tested ReturnValet in Texas during the holiday season, saved money on returns, but "not a tremendous amount," a company spokesman said. The bigger attraction is offering its customers the convenience of returning their box at a retail store. "No matter who does it, you have to open the package, examine it, see what condition it's in, and decide the final disposition," the spokesman said.

As online shopping grows, so does the total amount of returned orders--and the expense of dealing with them, which Spieler pegs at $3.2 billion in 2001. Jupiter Media Metrix reported last week online traffic jumped 50 percent this holiday season compared to last year and 95 percent vs. 1999; Nielsen/NetRatings estimates spending reached $13.8 billion, a 15% increase. "Retailers sell stuff with great electronics, but returning items is completely horse and buggy," Spieler says.