Guest Column: Return Rate Miscalculations Impact More Than 50% Of Companies Nationwide

By Dave Justus and David Speights, The Retail Equation

Recently, a panel of the National Bureau of Economic Research confirmed that the United States has been in a recession since December 2007. While not surprising, the news does give economic validity to what many have intuitively felt for some time. It also underscores the necessity of accurately monitoring finances and implementing programs that will give meaningful numbers in terms of actual operations as well as public accounting documents.

Retail sales for the 2008 holiday season – using data from November and December – were reportedly down 2.8 percent over the previous year and weaker than many industry experts anticipated. Whether those sales actually generate margin dollars and profits after discounts, promotions, returns and exchanges are taken into consideration remains to be seen. And, many retailers may never know their real return or exchange rates because those rates are not identified in standard point-of-sale (POS) and retail enterprise resource planning (ERP) reporting systems, which tend to miss key components in identifying the true dollar impact of merchandise returns on a retailers business.

However, retailers in growing numbers are beginning to examine their return rates from an operational point of view in order to more accurately quantify the impact returns are having on their businesses. These retailers realize that by correctly calculating their return and exchange rates, they are better able to understand the impact returns have on profitability and thereby improve their net sales, gross margins, and profits.