Manufacturers: Reward Retailers To Reduce False Product Returns

A group of researchers say manufacturers have the power to reduce "false" product returns -- products with no flaws that are nonetheless returned by consumers. How? By motivating retailers to help solve the problem via a target rebate program. Such a program rewards sellers for keeping false product returns below a predetermined target level, they report.

"Right now there's no incentive for retailers to put extra effort to reduce the number of false failure returns because the manufacturer provides full credit for every returned product," says Mark Ferguson, assistant professor of operations management at Georgia Institute of Technology's College of Management. Ferguson conducted the research in collaboration with V. Daniel R. Guide Jr. of Pennsylvania State University and Gilvan C. Souza of the University of Maryland. Additionally, Ferguson notes, many manufacturers won't charge retailers for false returns, fearing the retailers will push a competitor's product instead -- or refuse to sell the manufacturer's product.

Ferguson explained that retailers can take actions to reduce false failure returns, such as spending more time with customers initially to better understand their product needs and training the sales staff to clearly explain how products operate. The professor said that many technology products are returned simply because the buyer couldn't figure out how to make it work.

"False failure" product returns cost U.S. manufacturers an estimated $100 billion a year, according to data from Georgia Tech.