HOT TOPIC A new look at old problems
Money Happy
What are ECPs—and the industry—really paying for the privilege of frame and lens returns?
By Erinn Morgan
You are likely one of the many optical professionals who regularly returns frames and lenses to your suppliers. Perhaps you send back frames that do not sell over time. Maybe you regularly utilize the benefits of your lens' warranties, returning them when customers come in with a scratch or dislike of a certain new feature.
At least one in seven frames, 14.6 percent, are returned to suppliers, according to the American Optometric Association's "Caring for the Eyes of America 2006" survey. This number has remained steady over the last several years, but some suppliers say that return rates today can range as high as 20 to 25 percent. Estimates on warranty-related lens returns also vary, but experts peg it at anywhere from 10 to 25 percent.
BUSTING THE BOTTOM LINE
What you may not realize, however, is that the free return services all tax the supply system and even your own business. Certainly, there are unseen premiums for this ultimate convenience. "People think there isn't a cost involved in making returns but there is," says Dave "Lenny" Lehnhausen, vice president of field sales for Shore Lens Company. "It takes time to pick, pack, and ship this item. Then there is the cost of shipping it back and handling it. Plus, someone in the office has to invoice it, put it in a box, and ship it back."
Are you really calculating the costs of the returns you are making? This isn't just considering what returns are costing in terms of your staff time and patient satisfaction. There is an actual price tag on returns that adds up and eats into everyone's bottom line.
"Obviously, it adds costs to the price of a frame. Returns are costly to everybody," says Larry Roth, Marchon co-owner and executive vice president of sales. "It actually costs more to process a return than to process a frame going out. There are twice as many people that touch a return than a frame simply going out."
"It is definitely an issue and with the cost of fuel, shipping is now much more expensive," says Bill Harrison, vice president of sales at Sàfilo.
The cost to offer returns as a sales feature adds quite a bit to the cost of doing business. The total for each return may be larger than many realize. "On the frame side alone, it is about two dollars just to handle the return," says Harrison. "Once you expose those costs and shipping charges and packing, the problem is more tangible."
THE HIT LIST
Have returns—originally instated to help the industry—actually hurt the independent ECPs who heartily participate? Some believe that lens warranties and frame returns helped give birth to a few negative trends in the industry.
Devalued product: A lack of culpability for returns on the part of buyers and sellers alike has created an environment that doesn't value quality product. Frames are also literally devalued by the return process. The value of frames that are 12 to 20 months old when they come back to the manufacturer is less than a newer frame, Roth notes.
| Smart Supplier Initiatives |
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| 7 ways suppliers are trying to solve the returns conundrum. 1 In the last five years, Marchon has reduced its return rate by over 20 percent. They accomplished this by making their customers aware of their own high return rates and closed the accounts that were not profitable due to a high volume of returns. 2 Almost three years ago, Marchon also created Recommended Product Assortments for its customers—a roster of frames that are bestsellers or recommended by a designer. "This lineup of frames is the best of the best," says Larry Roth, Marchon co-owner. "These are the frames that we are focusing the reps to sell." 3 Like many other forward-thinking eyewear companies, Marchon has also focused on selling the right products to the right accounts and keeping doors limited. "When you have the right product in the right doors the product sells a lot better and you have fewer returns," says Roth. "If the right account has the right product with the assistance of the rep, that should increase sell-through for the customer and profitability for Marchon." The onus has also been put on product design to make sure the styles in their lineup are right for their brands and customers. 4 At Sàfilo, education is the tool used to help curtail high return rates. "Our return rate has gone down, and I believe that is because of our knowledgeable sales reps and the dispenser education we offer," says Bill Harrison, vice president of sales. "We try to take a business approach with our customers," he adds. "The better retailers and optometrists are starting to analyze the business to lower the return rates, realizing the increased costs of handling and shipping from their end." 5 On the lens side, some savvy suppliers are offering discounts and rebates on products that are not returnable. "That's the way our model is—no returns, no fuss, no muss," says Dave "Lenny" Lehnhausen, vice president of field sales for Shore Lens Company. "Returns are a lot of hassle; and instead ECPs can take the discount and they don't have to deal with returning the products." 6 This trend is also picking up on the frame side with the larger retailers. "A lot of them are taking extra percentages in addition to the purchase price in lieu of a return option for product," says Jamie Shyer, the COO of Zyloware and chairman of the Vision Council of America (VCA) Eyewear and Accessories division. "They know they have the wherewithal to work through the extra product." 7 In a very progressive move, Pech Optical lab has developed an educational seminar entitled "Free Care: The Real Cost Presentation" for dispensers on the pitfalls of returns. "First, I like to take the word 'warranty' out of the synopsis. As soon as you say warranty, people think free," says Pam Gibson, education coordinator. The seminar incorporates a pencil sketch on how every warranty or redo lens is one free care. "I take the number of 'free care' items that go through an office and multiply that by the average sale price," she says. "That's the dollar value walking out the door at no charge." This very effective presentation shows ECPs how the proliferation of returns has devalued their products. "Every time we offer free replacements, we devalue our services," adds Gibson. "We have lost sight that this is eyewear and a medical device combined. We have to be better consumer educators and that can be done in a very positive light. We are just trying to help inform and educate." |
Eyewear discounters: Consumers figure that if lenses and frames can be replaced, why should they spend at an independent when they can go to a discounter, notes Cross, who adds: "We are encouraging the consumer to shop around and choose products based on price. Hence, the mass merchants."
Strained relationships: Many also believe that returns have created an unhealthy environment that puts pressure on the relationship between suppliers and ECPs. "A successful business relationship is one in which you win and I win," says Cross.
Paperwork pileup: Returns also end up costing ECPs in terms of time. "It becomes a paperwork nightmare to keep track of your inventory on what is being returned and what is coming back," says Laurie Badone, manager of sales and marketing support, Seiko Optical Products of America, Inc.
REJECTING RETURNS
With all of these issues, one might wonder why the industry doesn't reject returns altogether. But turning around a big ship is no easy task.
"Returns have been around forever and it's hard to change an industry overnight that is used to doing business this way," says Roth.
The Vision Council of America's Eyewear and Accessories Division has created a task to examine the issue. Notes Jamie Shyer, COO of Zyloware and chairman of the division, "It is unlikely that each company is going to say they won't accept any more returns. We all just need to run our businesses better and help ECPs run their businesses better too."
Looking at the issues has led many suppliers to take action. Says Shyer: "We want to support and educate our retailers because without them being in business, we go out of business." EB
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