Consumer Electronics Industry Faces a Projected $17 Billion Product Returns Bill: Accenture

By Nathan Eddy  |  Print this article Print

The research also revealed a significant opportunity to cut costs and reduce the level of product returns.

Customers returning electronics products will cost U.S. consumer electronics retailers and manufacturers nearly $17 billion this year, including receiving, assessing, repairing, reboxing, restocking and reselling returned products. This represents an increase of 21 percent since 2007, according to a research report from management consulting, technology services and outsourcing company Accenture (NYSE: ACN).

The research is based in part on a survey of executives from communications carriers, consumer electronics retailing and consumer electronics manufacturing companies, which revealed that product return rates over the past three to five years have increased for more than half of the retailers (57 percent) and nearly half (43 percent) of the manufacturers surveyed. Only 13 percent of the retailers and 12 percent of the manufacturers surveyed indicated that return rates are trending downward.

However, the Accenture research also revealed a significant opportunity for the industry to cut costs and reduce the level of product returns, given that only 5 percent of returns are related to actual product defects. While 27 percent reflect "buyer’s remorse," 68 percent of returned products ultimately are characterized as "No Trouble Found." This suggests that, despite the customer perceiving a fault, no problem was detected when the item was tested against specifications set by retailers or manufacturers.

The report also concludes that solving this No Trouble Found problem—or even reducing it slightly—could have a significant impact on the cost of returns. Accenture has calculated that a 1 percent reduction in the number of No Trouble Found cases could translate to annual savings of 4 percent in return and repair costs, or $21 million for a typical large consumer electronics manufacturer and $16 million for the average consumer electronics retailer.

"These high consumer electronics return rates are unsustainable in a sector with brutal competition and thin margins," said Mitch Cline, managing director of Accenture’s electronics and high-tech group. "Manufacturers and retailers should do more to differentiate their customer service by helping consumers understand, set up, use and optimize the products they purchase. Most compan­ies invest considerable sums to manage returns, but need to refocus their strategies on proactively preventing returns through customer education and aftermarket support."

The report also identifies several steps companies can take to attack this problem. Most notably, companies should measure the impact of returns, develop consumer product-education classes, offer delivery and setup services to consumers for highly technical products, invest in proactive customer service on high-cost/high-return products, provide multiple service options and create simpler product designs.