J.C. Penney: Multi-Channel Returns Management

In this research insight, we examine J.C. Penney, a best-practice company in multi-channel returns management. We illustrate the complex business processes that constitute returns management - the other side of customer relationship management (CRM).

• It is estimated that approximately 25% of online purchases are returned. The inability to efficiently handle returns and exchanges of items bought online inevitably leads to aggravated customers and decreased customer retention. Retailers require return management systems that are painless for the consumers and seamlessly address the emerging multi-channel returns problem.
• What does multi-channel returns mean? Customers can use three different channels to buy - in-store, call center, and online. They have two ways of returning the product: in-store or direct. This leads to multiple process combinations. Buying online, returning offline (in-store). Buying online, returning online (via parcel services). Buying via call center, returning offline (in-store). The leading retailers are racing to create comprehensive solution for multi-channel returns management integrated with solutions for order management.
• Clearly, the multi-channel returns problem is growing in complexity. Not paying attention to this area can lead to significant financial problems for retailers. For retailers that have not optimized the returns process, the cost of returning products can be as much as 70% higher than the cost of the initial shipment due to unpredictability of return volume and frequency.
• On the flip side, the growing wave of product returns is creating a boom for online auction, liquidation, and disposition companies like Overstock.com, eBay, Amazon.com, and others. These firms receive a commission for selling other parties' inventory on their Web sites. The business goal for these firms is to solve a significant pain point for retailers and manufacturers by drastically cutting the costs of handling product returns, damaged products, and overstock mistakes.

We wrote this case study to give readers a clear understanding of why multi-channel returns management is a major CRM problem facing retailers. We also wanted to highlight the business case for a technological infrastructure to manage the returns supply chain. For more information on the technology platform, see Kalakota and Robinson, Services Blueprint: Roadmap for Execution (Addison-Wesley, 2003).

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