War on store returns

Many consumers have grown accustomed to being able to bring electronics goods back to the store for just about any reason. Now, retailers and manufacturers are taking new steps to stem the tide of product returns.

The U.S. electronics industry last year spent about $13.8 billion to re-box, restock and resell returned products, according to a study by technology consultant Accenture Ltd. Especially galling to manufacturers is that many returns are preventable: Only about 5 percent of returns were because a product was truly defective. Instead, most consumers give up on products for other reasons, such as the device being too confusing to use, the study found.

Defects aren’t ”even in the top three reasons for returns,” says Mike Abary, a senior vice president at Sony Electronics. The primary reason consumers return Sony products is because they ”didn’t meet expectations,” he says.

With an economic downturn threatening to sap consumer spending, companies are taking a number of actions to cut down on customer returns. Some manufacturers, including TV maker Vizio Inc., have begun including more information on packaging to help consumers avoid buying the wrong products. Other companies such as Seagate Technology are replacing lengthy instruction booklets with simpler guides to get users up and running faster and with less confusion. And a few companies, including retailer Best Buy Co., have set up consumer concierge services, sometimes for a fee, to resolve complaints before customers have a chance to return the product.

Jason Brady, an auditor in Jacksonville, Fla., recently returned to Best Buy a $400 Sony Playstation 3 that his wife bought him for Valentine’s Day – not because it was defective, but because he learned his particular model couldn’t play his old Playstation 2 games. ”I wasn’t happy with it,” says Mr. Brady. ”I returned it and got all the money back.”

The harm to companies from returns can be lasting: Accenture found that one-quarter of people who return an item don’t buy that same brand again, while 14 percent of such people are unlikely to buy from the same retailer again. The estimated return rate for consumer electronics devices ranges between 11 percent and 20 percent, with the highest rates for wireless phones, GPS units, MP3 players and wireless-networking gear.

Among companies fighting back against returns is Vizio, which says many buyers of its high-definition TVs don’t understand some of the basics, like where to get the sharp-looking new programming. To make this clear, the Irvine, Calif., company several months ago added a notice on its packaging material that instructs people to hook up their TV sets to a high-definition source, such as a high-definition set-top box from a cable service. Consumers who connect a high-definition TV to a standard set-top box won’t notice much difference in picture quality.

Vizio also has included with its instruction booklets a one-page quick-start guides that focus on the basics of set-up. And the company recently began including with its TVs the latest kind of cable – known by the designation HDMI – to connect its VO series TVs to high-def products. A major reason was to head off unnecessary returns from customers who were used to older cables with different connectors.

Vizio says its efforts have reduced product returns as well as the number of customer-service calls, but the company declined to quantify the change to returns.

Disk-drive maker Seagate Technology did away with installation CDs and lengthy instruction booklets when it launched a consumer line of digital storage products called OneTouch last fall. The installation software now comes preloaded onto the device and a short leaflet is included. The Scotts Valley, Calif., company says return rates have declined since the changes were made.

Sony Corp. has taken a different approach with some of its products that makes it harder for consumers to bring them back. The company in 2006 added an option allowing consumers to engrave their name or other message on a Vaio computer. It expanded the program to its digital cameras last year. Sony says the program was started to let customers personalize products, but a side benefit for Sony is that engraved products can be returned only because of defects or other reasons that are the company’s fault.

Return rates on engraved Sony Vaios are negligible, compared with about 5 percent for non-engraved PCs, the company says, saving more than $1 million so far. ”I have a feeling that people are understanding the condition that you can’t return it,” Mr. Abary says. ”But also once they have engraved it, they feel like it’s a part of them.”

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