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CEA Meeting Puts Focus On Product-Return Woes

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.

Target transportation director Mike Hoyt agreed: “VIP lets us go to the store level with information on returns. Everyone makes mistakes, but if there are problems in the individual stores or regions, we can monitor them, and they have to improve.”

“This is mutually beneficial,” Hoyt added. “We trust Genco as a middleman to work with both sides fairly.”

Kmart is also a Genco customer, said Pete Reynolds, RGC field manager for the chain. “Vendors used to get products from thousands of stores, but now get truckloads,” said Reynolds. “Product is in better shape when it is sent back to vendors [using the VIP system]. We try to get products back to resell them. We have a process in place where the proverbial 10-year-old phone is not accepted as a return.”

The training of in-store salespeople is a key to nipping returns. Anne Marie Mueller, president of Creative Channel Services — developer of the CyberScholar, CyberSmart and CyberReps programs — stated bluntly, “The salesperson is the key influencing factor [on returns]. They must qualify the customer and provide proper product choice.”

She urged that on the part of salespeople “there is a need and desire for both cyber and live training.” CEO Woody Nash pushed cyber training as the key. “Consumers want informed salespeople,” he maintained. “Consumers are learning more about products.” His site provides “access and support on the use of training materials,” he said, which can provide research and training incentives, and provides each employee with a site for training.

Rick DelGuidice, training manager for Matsushita Electric Corp. of America’s Panasonic and Technics brands, delivered the manufacturer’s view. He noted that even during face-to-face training, “you still find some people falling asleep in the back of the room. They won’t be working at that store three months from now. You have to focus on those employees who want to be trained and are in the business for the long term.”

DelGuidice noted that his company has also improved operating guides and uses websites for detailed product information that can help educate the salesperson and the consumer.