Earlier this summer, in a workshop with a global sports brand, we came across the terms X and Y time with respect to their returns process. The brand’s team had defined the X time as:
the time between a customer receiving their ordered online goods to dropping off the goods for return, whether it be in store or via any of the third-party return services used.
The Y time follows on from the X time measure and is:
the time taken to process the return items from drop off through to the ultimate end destination of the returned goods.
We’d not come across these definitions before (they may exist elsewhere but are not commonly used) but it seemed a clear way to reference and describe two vital elements in a returns process. So, the X + Y time is then the time between a customer receiving their online order and any returned items in that order being received and at the returns processing plant. It’s normally once an item is processed that a return refund is actioned and it’s also normal to expect this process to be less than the retailer’s returns policy period.
Why is important to understand the X and Y time?
There are a number of reasons, including:
- The return period end to end (X+Y) is one of the most influential on customers perception of a retailer. The shorter the total time before a customer is refunded significantly affects their likelihood of shopping again with that retailer.
- The longer the X+Y time the more likely returned stock will not be able to be resold by the retailer at full value.
- The X time window is a prime customer engagement opportunity, where a retailer can significantly affect profitability and customer retention through targeted messaging.
- Customers want the X time to potentially be as long as possible
- Customers want the Y time to be a short as possible
- The Y time duration negatively affects customer perception of the retailer the longer it is
To understand these reasons and identify other insights we thought it useful to define X and Y a bit further, by breaking X and Y into smaller components. Now we can define:
Xdecision = time taken by a customer to decide to return items after they have received their goods
Xdrop off = time from decision taken to return items to completing the drop off
X time= Xdecision + Xdrop off
Typically, Xdecision << Xdrop off where Xdecision is a matter of hours and Xdrop off is frequently a number of weeks And for the Y time we have identified different scenarios, each is the time taken from drop off to a different end destination of the goods. YWH = time from drop off to Warehouse stock YStore = time from drop off to Store stock Yrecycle = time from drop off to recycle Yn = time to …. n scenario Yitem specific = specific routing at item level.
So what does this mean for businesses?
Keeping customers, ensuring customers are happy and profitable should be the #1 aim of a business. Consequently, ensuring action is taken to influence or ‘nudge’ customers in their post purchase decision making to speed up the X time and appropriately manage the Y time is critical.
The nirvana scenario for a business is where they can operationally benefit from a item specific Y time, where goods are routed at a speed and to a location which is most efficient and effective whilst at the same time ensuring the customer is refunded as promptly as is practical to meet the customer needs and expectations. Add to this an X time which is as short as feasible, where the customer is engaged with but not pressured, and all parties should be as happy as possible.
To move towards this ideal scenario there are a number of key tools to use. Firstly, a smart digital returns environment, where the returns process is online, bespoke and personalised to the customer. This allows for a dynamic and curated returns proposition and provides a platform for nudge dialogue and data capture.
Secondly a connected ‘reverse OMS’ approach. Allows a business to know where it needs returns stock (which could account for up to 50% of overall stock) and when it needs is by is vital.
Finally, a holistic view of profitability, by customer, product, store and warehouse processes. A cumulative view of all operating costs, called true profitability which drives a decision-making framework for dealing in real-time with customers returns and optimised return options. This is a radical departure from the static operations of today but with these tools and an effective management of the X and Y times business will see dramatic increases in profit and will have more loyal and happy customers.