Product Returns: A Black Hole for Profit?

Tracie Nunez

If you sell parts, as a shop, a distributor or a manufacturer, product returns are inevitable.  Welcome to the dark side of running a profitable business.  If you aren’t concerned about your return process, you should be.  Money could be disappearing with each return you handle.  You accrue costs going out, coming back in, checking the product, re-shelving the product, clearing the paperwork trails and adjusting reorder points.  This is one of the most expensive aspects of distribution.  Basically the more you handle a part, the less profitable it is. After interviewing several PWA distributor members, here are some basic tips to improve your process and ultimately save you time and money.

 1.       Order the right part the first time

 2.       Reduce cancellations and no shows by requiring deposits

 3.       Contact the manufacturer for more information when in doubt

 4.       Initiate a return quickly and follow their guidelines

 5.       Package the return properly

What should you expect from a distributor?
When return requests are received, the distributor needs to provide complete and clear return instructions to the shop. The distributor should act quickly when providing the shop with RMA’s, call tags and scheduling pick-ups. When the distributor receives the returned item, they should inspect the product and issue credit where possible. Shops should have realistic expectations in regards to the processing of returns; as some product lines need more attention to detail and may take longer than expected for resolution.  A distributor should quickly communicate next steps in the process so you and your customer know what to expect.

It is important to note that sometimes distributors have to wait for the manufacturer to credit the part.  Just because a manufacturer issues an RMA number does not always mean instant credit is given.  This always depends on the manufacturer.  Online return portals help speed the flow of information and give you immediate access. Understand return fees when the product is not a true warranty covered item. A distributor might charge you a restock fee, allow a percentage of returns based on your purchasing volume or even have a set returns compliance fee with every purchase.  If you aren’t seeing these types of fees, you are most likely being charged a higher price to cover those expenses up front.  The best win-win is to not be charged for it in the price and have very few returns because you sell the right part and understand your customer. 

Distributors Improvements

Today’s leading distributors recognize the burden product returns are to every business and they are actively improving their service to the shops.  Manufacturers are scrutinizing returns much more closely than in the past and distributors have to follow suit.   Sales staffs are being trained to ask the correct questions and qualify the parts to be delivered when the order is placed.   While pulling and shipping parts, redundancies are put in place to ensure the parts being delivered are correct. Quality controls are created, like inspecting parts to make sure they are in new and saleable condition or weight verification of final shipping box.  Most have simplified their return forms and provided online portals so questions and returns can be handled quickly. Some multiple location distributors have returns sent to a central warehouse location so they can be processed in bulk to reduce cost and increase processing speed.  Many distributors have dedicated full-time returns department staff to improve handling, resolution and tracking of the process from start to finish. Progressive distributors will work with shops that have high return rates by providing extra training, support and contact.


Bottom Line

No one likes returns.  They are part of the business, but extremely expensive on all fronts.  A problem with one return can require up to ten more sales to make up the profit lost on that one sale.  Customer service needs to be a top priority to diligently and fairly handle each return.  Manufacturers, distributors, and shops all recognize a softer stance is sometimes the best approach when dealing with a good customer and sometimes, it is needed, to keep a small return issue from developing into a larger problem. However, it is important to recognize if the end user’s request is over the top.  If they bought a product, installed it themselves incorrectly, and the part flies off on the interstate, no manufacturer or distributor will issue a credit because a shop wants to take care of that customer.  Every shop can improve their return by increasing their staff’s product knowledge, consulting with their distributor or the manufacturer when a problem arises, and communicating with their customer.  Remember the less you handle a part, the more profit you get to keep.