Creating an Effective Process for Returns in Omnichannel Retail
With the major selling holidays now behind us, retailers are preparing to handle the onslaught of returns that began on Dec. 26 and continue well into the first few weeks of the New Year.
In fact, according to the National Retail Federation’s “2014 Consumer Returns in the Retail Industry,” the amount of holiday merchandise returned to stores last year amounted to $68.9 billion.
For omnichannel retailers, the returns process can be a make-it-or-break-it -moment in terms of creating a lasting customer experience memory with their consumers. Because customer loyalty is the product of all engagements with a retail brand, a smooth and customer-centered returns process is a critical part of the omnichannel shopping experience. To fully prepare a retail organization for the heavy traffic of expected returns that will happen both online and in-store, it’s important to take a behind-the-scenes look at the processes that help drive a smooth return.
In the digital world that we now live in, today’s consumers require the ability to purchase items online and return those items at the physical store if needed.
The returns process should be seamless and responsive to all channels while also guaranteeing consumer’s privacy and information safety, diminishing the possibilities of credit card fraud as much as possible.
Retail industry veterans will probably remember how older point of sale (POS) systems would mask credit card information — a setup that was significantly easier for fraudsters to take advantage of and one that led to restrictive return policies that often created ill will with customers. However, with the tokenized approach outlined below, the POS doesn’t hold any credit card data. As a result, retailers can offer more flexible, shopper-friendly return policies without jeopardizing the shopper’s card data.
The Players
With a few additions, the same systems and entities are involved in the returns process as in the payment process:
• The POS system: The POS is responsible for scanning the receipt for the return transaction and the eligible items. It also communicates with the enterprise transaction database and returns management system to verify the return.
• The PIN entry device (PED, a.k.a., the PIN pad): As with a purchase, the PED accepts and encrypts the data for the card used in the original transaction.
• The enterprise transaction database: This back office retail system maintains a rolling record of recent transactions associated with the token generated during the original purchase.
• The returns management system: This system logs all returns activity against the original transaction.
• The electronic payment server (EPS): During the returns process, the EPS accepts the encrypted data from the card swipe and communicates with the payment gateway.
• The payment gateway: This application typically runs at a central enterprise location. Its role is to interact with the EPS to take the card swipe and generate a numerical token used as a card’s identifier during the return. It can also house a token vault where the token from the original transaction is stored.
• The acquiring bank: This is the bank or financial institution that processes the original payment on behalf of the retailer and credits the shopper’s account with a valid return.
The Returns Process
While the return transaction between an associate and a customer can take just two minutes to complete, the process is more complex than just pressing a few buttons.
When a shopper hands an associate the card used for the initial transaction, the associate should proceed to swipe the card through the PED. The PED will then encrypt the card information and forwards it to the EPS. The EPS contacts the payment gateway’s token vault, and the token vault generates a token based on the card information (and matching the token from the original transaction) and sends the token back to the POS.
The POS takes the token and searches the enterprise transaction database for a transaction associated with that same token. The enterprise transaction database returns all matching transaction information to the POS (multiple transactions may match).
The associate selects the item to be returned from the matching transactions and scans the returned item. The POS connects with the returns management system to ensure the item is linked to one of the transactions, and returns management sends a confirmation to the POS.
Following the confirmation, the associate swipes the credit card at the PED, the encrypted information goes to the EPS, the token vault at the payment gateway generates a new token for the return, and the token goes to the acquiring bank to have them apply the credit to the shopper’s account.
The token for the return is also forwarded to the POS to keep a record of the return and to transmit the transaction data to the ERP system.
Understanding the returns process can be a critical step in maximizing the omnichannel customer experience. For retailers, the returns process is more than an afterthought. As more customers buy online and return items to the store, it can be a clear differentiator in the shopping experience.
A safe, secure returns transaction is a small but significant part of building the good will that will drive repeat visits and future purchases.