Returns cost retailers, manufacturers billions

By Nicole Maestri

LAS VEGAS (Reuters) - Returns of products that do not easily link together or work like consumers believe they should is costing manufacturers, communication carriers and electronics retailers almost $14 billion a year in the United States, according to Accenture.

At the Consumer Electronics Show, the industry's largest expo, the world's major technology companies are displaying their newest shiny gadgets for 2008. Many are showing new ways that consumers can connect disparate technologies -- like televisions and cell phones and the Internet.

This idea, called convergence, was designed to make consumers' lives easier as technology becomes more pervasive.

Instead, Accenture Global Managing Director Allen Delattre said in an interview on Tuesday that many consumers are returning new gadgets to retailers, saying they do not work.

"If you decode that, it decodes into 'It doesn't work like I wanted it to'," he said of the real reason shoppers are bringing products back to stores.

This disconnect -- between what manufacturers are promoting and what consumers are experiencing -- means consumer electronics manufacturers, communication carriers and electronics retailers will spend an estimated $13.8 billion in the U.S. assessing, repairing, reboxing, restocking and reselling returned merchandise, Accenture said.

But Accenture also found that more than two-thirds of the volume associated with returns is characterized as "No Trouble Found" -- meaning the returned products either did not meet the customer's expectations, or the customer believed the product was broken but when it was tested by the retailer, no problem was found.

To avoid returns, Delattre said manufacturers need to rethink how they design, manufacture and package products, while retailers need to a better job of educating consumers on how products work or what to expect from new devices.

If not, they are only diminishing their sales by having to process costly returns, he said.

"The cost to return on one computer deletes the margin of two others they sell," he said.