Customers returning electronic devices will cost U.S. electronics retailers and manufacturers about $17 billion this year, an increase of about 21% from 2007, consulting company Accenture said in a new report. These costs include receiving, assessing, repairing, reboxing, restocking and reselling returned products.

U.S. Consumer Electronics Industry Faces a Projected $17 Billion Product Returns Bill This Year, Accenture Research Finds

The research is based in part on a survey of executives from communications carriers, consumer electronics retailing and consumer electronics manufacturing companies, which revealed that product return rates over the past three to five years have increased for more than half of the retailers (57 percent) and nearly half (43 percent) of the manufacturers surveyed. Only 13 percent of the retailers and 12 percent of the manufacturers surveyed indicated that return rates are trending downward.

However, the Accenture research also revealed a significant opportunity for the industry to cut costs and reduce the level of product returns, given that only 5 percent of returns are related to actual product defects. While 27 percent reflect “buyer’s remorse,” 68 percent of returned products ultimately are characterized as “No Trouble Found.” This means that, despite the customer perceiving a fault, no problem was detected when the item was tested against specifications set by retailers or manufacturers, according to Accenture’s new published report, titled “A Returning Problem: Reducing the Quantity and Cost of Product Returns in Consumer Electronics,” which captures key findings and insights based on the survey (www.accenture.com/product-returns-electronics).

The report also concludes that solving this No Trouble Found problem – or even reducing it slightly – could have a significant impact on the cost of returns. Accenture has calculated that a 1 percent reduction in the number of No Trouble Found cases could translate to annual savings of 4 percent in return and repair costs, or $21 million for a typical large consumer electronics manufacturer and $16 million for the average consumer electronics retailer.

With holiday season over and most of the purchases done, now comes the time when consumers are expected to return holiday purchases. And to make it worse, this time it will be more than the usual.

Returned merchandise in 2008 is expected to make up 8.7% of overall sales, up from 7.3% in 2007, according to retail trade group National Retail Federation.

It will be weeks before most retailers disclose the size of their holiday returns. However, a survey of 1,000 shoppers conducted on Christmas found a whopping 86% of parents said that if their children didn't love their gifts, they would take them back for a refund or exchange, says America's Research Group, a consumer research firm.

The Charleston, S.C., firm predicts returns and exchanges during the week after Christmas would rise 50% over the same period a year earlier.

Another reason that analysts expect higher return rates is that some retailers relaxed their return polices this year to boost their appeal to jittery consumers. More than half of the 82 major retailers that the NRF surveyed in November said their holiday return policies were more lenient this season. In 2007, that was the case for only 35% of retailers that the NRF surveyed.

J.C. Penney Co., for example, allows returns for customers without a receipt if they present the credit-card used to make the purchase. Target Corp. gives customers gift cards for items up to $35 without a receipt, up from $20 last year.

CBSNews also carried a segment on Retail Returns, check the video below:

So what do Retailers do in such a scenario? Multichannel Merchant has a list of do’s and don’ts on exactly the same, Making the Most of Retail Returns.

Related: Stores loosen policies to make it easier to return holiday gifts

LPInformation Magazine November issue has a very informative article on Returns fraud and how Retailers are using Returns Management Systems to minimize the loss due to fraudulent returns. Going by statistics, Fraudulent returns total $9.6 billion a year by one estimate and around $17 billion by another. Measures being adopted by retailers include the following:

Laurie J. Sorensen, vice president of LP and shortage control for Macy’s Northwest, says company policy requires customers to provide proof of purchase in the form of a receipt or a customer return label (CRL) to receive cash or credit back. Otherwise, the system will only allow store credit in the form of an easy exchange card or merchandise-only certificate.
A CRL containing the original purchase information “is placed on the merchandise tag and scanned at point of sale,” Sorensen says. “When a customer returns an item without a receipt, we are able to scan the CRL and identify the original tender, which they will receive a refund to.”

...

Within its proprietary refund management systems, one major retailer applies an algorithm to specific receipts, creating a unique number associated with that receipt throughout its lifespan. Depending on the payment method the customer chooses, that number can often be tied back to individual customers.

...

Mike Keenan, director of LP for Hayward, Calif.-based Mervyns, recently completed the implementation of a returns management system. He was sold on the concept due to his experiences while working for another retailer.
“We reduced returns by approximately $20 million,” he says. “It drove the people who did nothing but fraudulent returns right out of our stores.”
Returns management systems vary, but basically use either the original sales transaction history (stored in a central database) or statistical modeling to determine whether a return is potentially fraudulent.

Integrated Solutions For Retailers Dec 2007 issue also has an editorial on Returns Management where it talks about two ways to tackle the menace.

Two popular approaches are software-driven analytics programs and item-level product tracking. Both approaches have merits, and depending on your merchandise mix, they can be used independently or in tandem.

An analytic software approach helps retailers maintain flexibility in their returns policies, applying different returns parameters to different customer profiles. The last thing you want your returns policy to do is make legitimate returns difficult for your best customers, which are often the customers who return the most.

Modern returns management software lets store associates authorize returns in real-time by screening for fraud through analysis of customer-specific return behavior. By cross-examining historical returns and customer-specific transaction data, analytical software helps retailers identify specific return patterns. This is a great management strategy that provides retail leadership with vivid insight into the successes and failures of its returns policies. Oracle, Newgistics, and others offer such solutions.

CBS News Reports, the holiday season might not be so jolly for shoppers returning presents. Some major retailers are cracking down on repeat returns and changing their policies, too.

Retailers say fraud involving returns costs stores $16 billion dollars a year, so more and more chains are fighting back with policies and practices that make it tougher to return things.

They're shortening the time you have to return items after they're bought, hitting customers with hefty "restocking fees" on returned items, and cracking down on "serial returners" with new, sophisticated computer tracking equipment.
.
.
.
This fall, Sears began imposing a restocking fee of 15 percent of the purchase price on all electronics products that are returned after they've been used, or with missing parts or manuals. And while they give you 90 days to return other products, you now have only 30 days to return electronics items.
.
.
.
Many major retailers are even using hi-tech computer systems that track every return you make, and put a red flag on serial returners.

For instance, Wal-Mart has a system that automatically flags customers who try to return more than 3 items without receipts in a 45 day period. If you surpass that limit, they won't accept your returns. If you don't make any returns without a receipt within a six month period, the red flag goes away.

Internet Retailer reports on a new survey reporting that while there are fewer returns thanks to customers becoming comfortable and adept at shopping online, the cost of processing returns is high and an average web retailer spends between $6 and $10 for each return.