Vision - July/August 2008 - (Page 24)

products boomerang stop problem. By Al Delattre are more than a $13.8 billion Why returns or many years the CE industry—manufacturers, retailers and consumers—have accepted product returns as a “cost of doing business”. With few exceptions, little has changed in the industry’s approach to, and attitude about, returns. Even though companies have invested millions—if not billions—in product quality, testing and marketing, products are still returned at an alarmingly high rate. Accenture research found that during 2007 the total cost of returned consumer electronics in the U.S. amounted to $13.8 billion. Worldwide, the cost adds up to billions more. Consider that $13.8 billion is equivalent to $45 for every person in the U.S. The figure is potentially deadly in a brutally competitive market where some product margins are barely three to four percent. What’s more, many companies do not know the true extent of what returns are costing them. Across all categories of CE products, less than five percent of those returned actually have any material defect or problem. This is good and bad news. The good news is that the quality and reputation of the engineering and manufacturing base remains intact. The bad news is consumers are still returning products that work as designed. Compounding this is that the problem is worsening as products become more complex, feature-rich and “capable.” These findings also indicate that “simple buyer’s remorse” drives only about 20 percent of the actual returns. This tends to manifest itself as rethinking an expensive purchase, negative acceptance from family or friends, reaction to a bad sales experience, or the elusive “I changed my mind.” This leaves 75 percent of the returns “unaccounted for.” The critical issue is whether the industry understands the magnitude and potential negative repercussions of this widespread problem, and what should be done to overcome it to drive CE companies to become high-performing businesses. F What Is Really Going On? On the surface, this problem seems tractable. One knee-jerk reaction might be to tighten returns policies. If you prevent consumers from returning the goods, return rates will go down. Right? Maybe, but you would be missing the real issue. Our research found that while the industry can legitimately account for 25 percent of the returned products, the other 75 percent are returned for more fundamental reasons, such as consumers not receiving the “experience” they had expected. Regardless of their reasons for purJuly/August 2008 24 Maurizio Cigognetti/Getty Images www.ce.org http://www.ce.org

Table of Contents Feed for the Digital Edition of Vision - July/August 2008

Vision - July/August 2008 Contents Shapiro's Spectrum In This Issue The Economist C4 Trends Visionary Embracing Disrupting Technology Vaulting Ahead with Your Brand International Risk Stop Boomerang Products CEA Newsline Tech Speak Tech Policy Going Global Eye on Business Market Insider Just the Stats

Vision - July/August 2008

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