Monday, 2 December 2013

Product returns: What you can do with returned items and compensating the customer

If you want to know why Customer returns the product please do read our previous posts
Product returns: Why it happens and lean ways to reduce them - Part-1 
Product returns: Why it happens and lean ways to reduce them - Part-2

Now lets say, customer returned the order and it is in your hand, the question is what your are going to do with it?  The simple answer is it depends on the products condition. Lets see the possibilities
  • The vendor/supplier itself gave you damaged product.
  • The product was good when it was procured from the supplier/vendor, but was damaged while delivering it to the customers.
  • The product reached to customer in good condition but was damaged in reverse logistics ( bringing back from customer to warehouse)
So the first thing to do with product returns item is "quality assessment". Depending on the quality level we make the decision.
  • Resell: Say product is in very good condition - (probably customer misplaced the order ... or some other reasons) then you would like to place the item back into your inventory, and sell it as new product. You need to call inventory service, it is the same service being called when the item gets procured first time and gets added to the inventory.
  • Return it to vendor: The product is damaged. But  if you know clearly that product was damaged when it was procured from the vendor/merchant. Example: Electronic items accessories are missing, or they are not able to switch on. Probably, you can return the item to the vendor. This is the best compensation you can ever get, depending on the agreed terms and conditions with the vendor. Say for 100$ product you will get refund of 80$.
  • Sell as used product: The item was mildly damaged in this overall process. You cannot sell the product as new one. Probably you can sell it to the firm which sells second hand/used goods. Depending on the damage level, used products vendors pay you. Say for 100$ product you will get refund of 40$.
  • Liquidate: The product is completely damaged. You even cannot sell it as used product. Then you cannot keep it in your inventory. It will costs you a lot for inventory holding costs. You have to dispose it by giving to the liquidators.  Say for 100$ product you will get refund of 10$.

Compensating the customer

  • The next decision point is how you are going to compensate the customer for loss/return. In some cases, you can ship the new product to the customer.
  •  But in some cases, either you cannot ship the new product or customer is not willing to take the product from you - then there are two options. Either you can refund the money to the customer or you can give store credit to the customer - kind of virtual money,  which he can use only to purchase products from your website. Please do read our post on store credit concept.

B2B services

You can take help of B2B services - 3PL carriers, to do these operations. You can read more about outsourcing returns to third party services here.


Getting benefit  out of loss

  • You can get tax benefit on your loss.  The item was procured for 100$ and you you sold it to used products market for 40$, then depending on your country's tax laws you can get report 60$ as loss get exemption on this.
  • You can donate the item as charity and can get tax exemption benefit on this.

UPS report
IBM report
Ebay article


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