The Indian retail scenario is fast changing with the entry of large corporate houses and multinationals retail chains into the organised retail industry. According to studies, organised retail, which is 3% of the whole currently, is in turn pegged to grow to $64 billion by 2015. And one consequence of all those investments will be the fact that India's present two square-feet per capita retailing space will rise 15-20% by 2010.

While the outlook for the retail industry is good with extensive investments and expansion plans, the fact is that a majority of retailers need to focus on building a strong operation framework - be it merchandising, supply chain management or procurement. Today, foreign retailing giants are already successfully managing their operations innovatively to have an edge over competition. Indian retailers will have to put in place strong IT systems that address the various issues affecting operations. As they continue on the growth path, Indian retailers will have to make substantial investments in setting up a sound IT infrastructure.

Increasing customer adoption and higher footfalls also bring with it another critical issue, that of cost of handling returns. Cost of returns is a significant problem for retailers – particularly for Specialty and Department Stores, who experience the highest returns rate. Cost of handling returns includes product repackaging, markdowns, and item disposition.

Managing returns is an opportunity to improve top and bottom lines simultaneously. Effective Returns Management needs to address two aspects - facilitating easy returns for genuine customers and reducing fraudulent returns. Making genuine returns easier increases customer loyalty and top-line sales. Reduced return fraud improves net sales, gross margins, and cash flow, and results in more accurate inventory and commission payments.

The fraudulent returns problem

Reducing returns may sound like a silver bullet, but achieving the desired result requires a balancing act. How do you reduce various types of return fraud without losing desirable customers?

There are many types of fraudulent returns:
• No-receipt returns of sale merchandise with the expectation of a regular price refund
• Shoplifters or employees who use fake receipts to return merchandise for cash
• “Renters” or “wardrobers” who return expensive merchandise purchased just for a weekend event
• Cross-channel returns by criminals who commit same-day returns with merchandise stolen from one store or channel and returned to another

All customers are not created equal

Customers returning merchandise typically fall into one of six categories.

High-Purchase Returners

These are your valuable customers who have to return merchandise for some genuine reason.

Cross-Channel Customers

These are customer that buy in one store and return at another – this includes web-customers that return at your stores. Increasingly, customers have begun to research online and buy in stores.

Unaware Returners

You may consider them abusive, but some customers are not consciously taking advantage—they are simply unaware or forgetful of the timeframe stipulated in your policy.

Reluctant Returners

Reluctant returners detest the whole return process. If they have not returned anything to your store before, they may be afraid they will be turned down or embarrassed in front of others waiting in line.

Abusive Returners

Abusive returners have bought every brand of mascara in your stores and returned every one a month later, requesting a full refund because it dried out.

Outright Thieves

Some thieves are so bold as to take an item off your shelf, go directly to the checkout, and without a receipt, demand a cash refund. Or, they may rummage through a trashcan outside, find a receipt, steal the item, and then request a receipted refund.

Designing the Solution

Your returns management strategy should be flexible enough to treat each type of customer differently. A real-time, cross-channel policy that addresses the issues and opportunities at the point-of-return can deliver substantial benefits. Below is a set of considerations that will enable you address Returns Management effectively

• Real-time access to cross-channel transaction details and full integration with the point-of sale will give you access to location, item, quantity, price, tender, and customer refund history. This ensures that they get an accurate refund, in like tender, at the original purchase price, even without a receipt, and even if the store doesn’t carry the same merchandise. This means you can provide a speedy, accurate refund - without a lot of paperwork and questions.

• You may grant customer-service overrides for good customers - such as exemption from exception counting and preventing them from accruing exception history. This can ensure the refund requests of your best customers are not declined, hence preventing them from turning into loyal customers of your competition.

• Dynamic Receipt Messaging supplements your in-store return policy postings by alerting customers to your return policy, advising them of their return compliance, and letting them know when you have made an exception for them.

• An effective returns management solution would collect data on every return, in every store or channel, and handle returns via an Authorisation Engine that checks multiple return policies based on item, customer, associate, and store.

• Appropriate tracking and monitoring of Cashiers and Sales Associates is needed to detect internal return fraud and cases where the associate is colluding with customers.

A rules-based returns management solution effectively addresses the CEO's dilemma of the return policy pendulum - by enabling the retailer to achieve the right balance between improving shopping experience and enforcing policies that minimise returns fraud. With access to all of the required information at the point and time of the return, your associates can make better return decisions. The result is increased profitability through reduced return fraud and a better cross-channel returns experience for your good customers.

Jay Bhow is senior director & centre head, Oracle's Bangalore Retail Centre of Excellence