Big Trouble with "No Trouble Found" Returns
Confronting the High Cost of Customer Returns
Big Trouble with "No Trouble Found" Returns
How businesses seeking to achieve high performance are confronting the high cost of customer returns
What Companies Stand to Gain by Rethinking their Approaches to Customer Returns
Accenture High Performance Business research1 on consumer electronics manufacturers, communication carriers and electronics retailers has uncovered surprisingly large, unrecognized opportunities for manufacturers and retailers across the value chain. By rethinking their approaches to customer returns, businesses are realizing three significant benefits:
- For manufacturers, expenses linked to returns are decreasing.
- Retailers and others throughout the value chain are reducing costly customer interactions and administrative burdens.
- At the same time, these companies are helping to reduce the impact of returns and unmet expectations on their brand and customer loyalty.
Findings from our study suggest that total landed costs associated with returns range from 5 to 6 percent for manufacturers and 2 to 3 percent of sales for retailers. Instead of treating existing returns as a normal cost of doing business, businesses looking to achieve high performance are seeing significant improvements by addressing the underlying reasons for these returns.
Results from a recent Accenture study have uncovered surprisingly large, unrecognized opportunities for manufacturers and retailers across the value chain.
Return and Repair Cost Breakdown
The total cost of consumer electronics returns and repairs attributed to Europe and US consumers was estimated at $25.3 billion in 2007. Most companies, however, are not accounting for the full breakdown of these costs.
The current state of returns
In the consumer electronics industry, which includes devices sold by communication carriers and electronics retailers, Accenture estimates that the average return rate for devices ranges between 11 to 20 percent in the US and 2 to 9 percent in Europe.
Of these returns consumers were much more likely to provide a reason of “Buyers Remorse” in the US (27%) than in Europe (6%). However, instances of a consumer claiming that a device is “broken or damaged” is much higher in Europe (59%) than in the US (26%).
Our hypothesis is that the difference is tied to retailer return policies. European retailers are less likely to accept a Buyers Remorse return than in the US. Failure rates, as defined by the original equipment manufacturer (OEM), are consistently in the sub 5 percent range globally, with minimal differences across geographies. This is further evidenced by the fact that “No Trouble Found” (NTF) rates are also consistent, ranging between 60-85 percent of returns.
These study results indicate that businesses looking to achieve high performance can see powerful payoffs by addressing the twin challenges of both returns prevention and returns processing.
Returns Prevention
Although returns prevention has the highest potential to impact results, because it is considered an unavoidable cost of doing business, it is often overlooked—especially when related to completely functional, nondefective devices. The Accenture study demonstrated three areas that can have a significant impact on NTF returns:
- Improvements in design, packaging and documentation.
- Setting customer expectations and providing proper customer education.
- Providing important after-sales support as well as important accessories which are frequently overlooked.
Unfortunately—because many companies fail to effectively measure and track NTF returns—limited feedback is available to assess difficulties and drive consistent performance improvement. A key to returns prevention is the establishment of baseline information on return metrics, such as how long a consumer had the item before returning it, the reason given for the return, or whether an alternative product was purchased in place of the return.