The Nightmare After Christmas: No-Fault-Found Returns

Black Friday is a day that retailers wait for all year, and 2019 was no different. Digital sales for the retail holiday increased nearly 20 percent last year, reaching $7.4 billion across the 4,500 retail websites tracked by Adobe Analytics. Consumers also found their way into brick-and-mortar locations much more often, with many having opted to buy online and pick up in -tore (BOPIS). Adobe noted a 43 percent uptick in this behavior, surely a great sign for retailers that had labored to improve their digital offerings and experiences ahead of the 2019 holiday rush. Average order value, too, improved 6 percent, just shy of $170 per order.

However, retailers that counted those 2019 Black Friday dollars too early were in for a rude awakening in January. The days following last year’s Black Friday — a time period that many in the industry have come to dread — actually proved to be more important for retailers. Millions of shoppers started returning their purchases just days after the rush, and that pattern continued into early Q1 this year.

No-Fault-Found Returns: The Enemy of Retail

Though final numbers are still coming in, experts predicted consumer electronics sales — everything from coffee machines to video games to wearables and more — would exceed $400 billion in 2019. While skyrocketing sales were certainly good news for retailers last year, record-breaking sales meant stores had to contend with hordes of new customers attempting to unbox, install, activate and operate their new devices. As expected, they didn't always do so successfully. This led to millions of no-fault-found (NFF) returns, a three-letter acronym that continues to haunt retailers and impact balance sheets well into 2020. NFF returns in 2019 were largely due to consumers running into trouble when installing, activating and using their holiday shopping gifts.

Consumers issued a clear message to retailers last year: If the product they purchased wasn’t easy to set up, install and use for the first time, they were bringing it back to the store. This is a problem.

According to recent research on consumer behavior, everything from coffee machines and smart TVs to wireless routers and drones were on the chopping block last year. Consulting firm Accenture reported that 68 percent of all consumer electronics returns fell under the NFF umbrella. In Q4 2019 research, data showed 41 percent of consumers returned a nondefective electronic product within a 12-month period. What’s more, 65 percent of consumers polled said their new gadgets were returned after struggling with setup and installation.

Translation: A $20 billion black hole that made a huge dent in 2019 Black Friday and Cyber Monday revenue. One minute the cash was in the register. Days later, it was back in the hands of the customer.

Stopping the Bleeding

With retailers forced to hand over almost half of their Black Friday takings last year, putting a stop to NFF returns is crucial for the industry. The good news is new technology is proving to be an effective tourniquet.

Computer vision artificial intelligence (AI) is allowing retailers to attack a primary pain point for consumers. The science behind it is complex, but in simplified terms computer vision teaches machines — smartphones, tablets, chatbots and the likes — to see. It gives them a set of eyes so they can more accurately identify consumer problems with product setup and installation. Here’s how it works: a computer vision-powered system recognizes devices like coffee machines, wireless routers, TVs, thermostats, and more, plus all of their components (LEDs, ports, cables), and identifies proven solutions based on the visual symptoms it detects. All consumers have to do is unbox their new purchase, tap their smartphone, point the camera at the product, and let the AI walk them through the rest with a Snapchat-like overlay on their phone screen. It’s all about providing fast, effortless and effective self-service. And retailers are already beginning to dabble in it.

Implications for Retailers

Standard Cognition, Zippin, and Amazon Go, have all created “cashierless checkout” stores that eliminate the need to wait in line or scan your own items. Amazon.com plans to open 3,000 “Just Walk Out” unmanned stores by 2021, with hundreds of cameras and sensors enabling consumers to shop with zero human interaction. Computer vision integrated with digital payment solutions makes sure the right customers are charged for the right goods. Computer vision is also benefitting back-end retail operations. For example, Trax monitored products on store shelves and collected data that allowed it to figure out just the right number of doorbusters to stock last Black Friday.

When it comes to preventing those dreaded NFF returns, computer vision not only lets retail customers troubleshoot their own issues with ease, but also lets them virtually “try” the product before they buy. (A good example would be a consumer using the technology to make sure the new washing machine they’ve got their eye on actually fits the space where they intend to install it.)

2020 Outlook

Any area where retailers can improve must be explored, especially as return rates continue to increase and in-store traffic trends downward. According to RetailNext, which examined in-store shopping activity across tens of thousands of stores during Black Friday last year, traffic fell 2.1 percent. Meanwhile, average transaction values dropped 6.7 percent, and overall sales declined 1.6 percent.

Data aside, last year’s holiday season taught the retail world a number of lessons, among them that the dollars coming out of the register for returns are crucial for Q1 balance sheets. 2020 will likely be the first year when retailers test these new technologies en masse. The retail world should see some pretty impactful case studies come out of it, and time will tell if the technology can cut out NFF returns in a meaningful way. With the right features and capabilities, new technology that eliminates the compulsive need to bring back nondefective products looks like one promising area, but certainly not the only one. Retailers need to address the issue holistically to offer consumers a more engaging and interactive experience throughout the customer journey, from pre-sale right on through setup, configuration, troubleshooting, and maintenance.

Eitan Cohen is CEO of TechSee, a global leader in visual customer assistance. He's passionate about solutions-driven technology that reduces churn, improves the customer experience, and lowers operating costs.