Vision - November/December 2008 - (Page 47)

By Steve Koenig ] • [ financial factS from cea market iNsiDer Only 25 percent of returns result in a cash/credit card reimbursement or store credit, which brings the net cost of returns down to $2.2 billion. CEA’s CE Product Returns: Why They Happen and How to Reduce Them study shows the top three reasons consumers returned CE products during the past year were: product did not work as they thought (34 percent); product broke while using it (31 percent); or the product did not work out of the box (24 percent). The least cited reasons for returning CE products are: found a better deal (six percent); and no longer wanted the product (10 percent). When making their return, 69 percent of consumers received an exchange. Great news, since it minimizes the potential financial impact of returns on the industry. Of this group, 42 percent got the same brand and model; 14 percent got the same brand but a different model; and 13 percent got a different brand and different model. These results show loyalty to brands or retailers is not adversely affected by product returns, further good news for the industry. What’s more, 76 percent of consumers returning a product say they would purchase the brand again. And 86 percent say they would shop again at the retailer where the returned product was originally purchased. One-fifth of consumers returning a product got a refund, while another five percent took store credit. These are the return transactions that cause the industry pain, but what exactly is the prognosis? The aggregate value of CE products returned to the sales channel in 2008 will total $11 billion at the wholesale level—a painful figure when taken at face value. But fortunately enough, the industry can reduce this amount considerably as witnessed above through product exchanges. Keep in mind, only 25 percent of returns result in a cash/ credit card reimbursement or store credit, which brings the net cost of returns down to $2.2 billion. From that total, 39 percent indicated they made a similar product purchase at a different store, further condensing the cost of returns to just $1.4 billion—less than one percent of the estimated $173 billion in CE shipments in 2008. Tough Love Still, the sales channel is increasingly vigilant when it comes to returns. Many retailers have tightened return policies, scrutinizing product returns ever more closely and even penalizing consumers who return product through restocking fees. This tougher approach to product returns is the sales channel’s version of Vitamin C—forestalling returns “germs” from infecting the books. At the industry level, overall return rates average eight percent. According to the study, video products experienced the highest return rates at 12 percent followed by computer products (nine percent), audio products (eight percent), and in-vehicle products (three percent). Other CE products had a return rate around 10 percent. Return rates by category increase slightly when CE accessories are added to the mix. The overall industry rate climbs to nine percent and video again leads at 14 percent; followed by computer products (10 percent), audio (nine percent) and in-vehicle remaining at three percent. Returns of other CE products increased to 11 percent. To help avoid returns altogether, the study suggests several preventative measures applicable to retailers and manufacturers. At the store, consumers say they would like to see more informative displays (21 percent) and receive better information from salespeople (17 percent). From CE manufacturers, consumers recommend better telephone support (17 percent), more helpful user manuals (17 percent), better online support (16 percent), and simple set-up processes (15 percent). We may never find a cure for product returns. Yet, with the right balance of product supply, sales, service and support, the industry can stay healthy. • November/December 2008 N Medicine for the Cold Product o one likes product returns. Retailers fret over the adverse affect they have on profit margins. Consumers view returns with consternation because it can mean another trip to the store to potentially haggle over a replacement or refund. Nevertheless, not unlike the common cold, we all must deal with returns from time to time. And while a cure is unlikely, recent CEA research points to preventative “medicine” the industry can use to minimize product returns and Steve Koenig reduce their financial impact. Before we can treat the ailment of returns properly, first we must understand the cause: Why are CE products returned? Are any CE categories particularly affected? What is the cost to the industry? www.ce.org Jon Feingersh/Getty Images 47 http://www.ce.org

Table of Contents Feed for the Digital Edition of Vision - November/December 2008

Vision - November/December 2008 Contents Shapiro's Spectrum In this Issue The Economist C4 Trends Going Global Visionary CES Unveiled Eco-Intelligence Is Vital in a Sustainable Global Market XGP— A Game Changer Enhancing the Tech Experience High-Definition Decade Public-Private Partnerships CEA Newsline Tech Speak Tech Policy Eye on Business Market Insider Just the Stats

Vision - November/December 2008

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