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New Cross Channel Math

The benefits of cross channel retailing have been well documented. No matter how your customers access your brand, they expect the same brand experience, and cross channel retailing initiatives are focused on fulfilling this need.

But cross channel isn’t just good for the customer, it also pays dividends for retailers. Cross channel customers on average spend more than 30 percent more than single channel customers. And that’s just the top-line benefits; there are also bottom-line benefits to consider. There are several ROI models around “saving the sale” but what about eliminating the refund of a return?

Cross Channel Retail

In a recent discussion with a colleague, the following question was posed: Is there an inverse relationship between cross channel retailing and returns? Her logic was as follows. If retailers have invested in cross channel initiatives, this then presents more avenues to service customers, which results in more satisfied/happy customers getting the specific merchandise they need/want, which should then have a positive effect on merchandise returns.

In theory, it sounds like it holds water, but I was intrigued enough to develop a model to see if the numbers supported this theory.

In a 2009 study of customer returns in the retail industry, The Retail Equation states returns in 2009 were 8.04% of sales. Starting with this figure, I began to make some extrapolations. Given this percentage of returns, a retailer that does $300 million in sales will have $24,120,000 in returns. Assuming an average item price of $25, would mean that 964,800 items were returned.  For a 200-store chain with eCommerce, this would equate to an average 13 returns per day in any given store.

Assuming a portion of those returns are returned due to wrong size, what if the retailer – thanks to cross channel initiatives -- could easily find the size needed within their chain to fulfill the customer’s requirements -- and eliminate the refund for even just 1 of those returns? By my math, this would equate to eliminating 72,000 refunds or $1.8 million dollars, bringing the retailers’ annually return rate down from 8.04% to 7.44% of sales. Aside from this one “saved” refund, you then can consider the future loyalty implications for this shopper who walked away – not empty handed, but satisfied -- with the exact item they were looking for.

Let me know your thoughts, and if you’re interested in learning more about how retailers are leveraging cross channel initiatives, I invite you to join us on Wednesday, March 31, for a webinar sponsored by Epicor, BT Expedite and Stores, where industry analyst firm Martec International will present their recent research into cross-channel practices in the US and UK, based on interviews with more than 50 retailers.

Posted by Diane Cerulli, Director of Product Management, Epicor

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