As online returns grow, process grows more complicated

Starting this week, online merchants are moving leftover Mother's Day gifts to the virtual markdown shelf and dealing with returns. Done right, a return system is built upon linked back-end systems and contains myriad return scenarios written into the business rules.

And that, according to a study released last week by Jupiter Media Metrix in New York, will be increasingly important as the amount of goods purchased -- and returned -- continues to grow. By 2005, Jupiter estimates, consumers will return 90 million items bought online, representing about US$5.8 billion in costs per year.

Accepting returns of goods bought online is a logistically complex and costly undertaking, and one that Sundance Catalog Co. is just beginning to tackle. The Salt Lake City-based merchant sells environmentally safe products and clothing through a catalog and online, but thus far, its return process has been handled by its call center.

The first process to tackle is integrating newer e-commerce platforms, often built in Java or Visual Basic, with the order entry processes of legacy enterprise resource planning systems, which are often built in proprietary languages such as SAP AG's ABAP or IBM's RPG, explained Jeff Wogoman, Internet manager of Sundance Catalog. Tying the returns process to the original order makes it easier to track an item and keep on top of inventory.

Many return scenarios must be scripted into an application, which requires a behind-the-scenes rules engine, said Joel Butler, chief technology officer at Swift Rivers Inc., a maker of automated returns software in Woburn, Mass. Swift Rivers' application is integrated into the merchant's Web site, so a customer returning an item initiates the process there.

The rules engine should generate instructions, depending on the reason for the return. For example, if the merchant sends the wrong size or color, the new product should get returned to merchant. A damaged item might get refurbished, while an item with a defect could be sent directly to the manufacturer, thus eliminating one shipment segment cost, Butler said.

And processing returns online becomes even more complex if the online merchant also operates retail stores.

Kmart Corp., for example, allows shoppers at to return online purchases to any of its 2,100 retail stores. Customers return items by filling out a paper form and returning the form with the item.

"Not everything changes with the Web," said Richard Blunck, CTO at Troy, Mich.-based Kmart. "You have to make things convenient for the customer."

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