Narrator [00:00:04]:

Welcome to Supply Chain Now, the voice of global supply chain. Supply Chain Now focuses on the best in the business for our worldwide audience, the people, the technologies, the best practices, and today's critical issues, the challenges, and opportunities. Stay tuned to hear from those making global business happen right here on Supply Chain Now.

Scott W. Luton [00:00:32]:

Hey, good morning, good afternoon, good evening wherever you may be. Scott Luton with you here on Supply Chain Now. Welcome to today's show folks. We have got an outstanding show teed up here today. We're going to be talking about reverse logistics, returns, management. In particular, we're going to be dialing it in on return fraud. Hey, what is it? What are the impacts? How can supply chain operations and retail leaders address this risk effectively for their organization? Stay tuned as we learn from a proven business leader with an innovative organization that's pioneered how brands engage with consumers far beyond the buy button. In fact, get this, this organization touches over 125 million consumers each year across 8 billion interactions in some 38 countries.

Scott W. Luton [00:01:19]:

And there's more in 55 languages. How about that? So get ready for an informative, enlightening and entertaining conversation around one of our favorite topics. So with all that said, I want to introduce our guest here today. Our guest has spent over a decade in retail and technology at organizations such as Nordstrom, Neiman Marcus and HP's Immersive Computing division. In his current leadership role, our guest has worked closely with renowned retailers like Nike and Sephora and lululemon and many Other Global and D2C direct-to-customer brands. Our guest is passionate about the intersection, that critical intersection of retail and technology with a keen focus on customer experience. And he is constantly finding new ways to drive innovation across the digital and physical worlds. Love it.

Scott W. Luton [00:02:09]:

Get ready folks. I welcome in David Morin, Vice President, Client & Retail Strategy with Narvar. How you doing, David?

David Morin [00:02:17]:

I'm good, Scott. Thanks for having me.

Scott W. Luton [00:02:20]:

Wonderful. Hey, I've enjoyed the pre-show with you. We've got a lot to get into and it's a very timely topic. You know, one of the things we've been doing, we've, we've been covering the world of verse logistics and returns and management for years and it's finally getting a little bit more awareness and that's a great thing and I appreciate the all the great work you and your organization have been doing but we'll get into that in just a second. But I want to start with something we learned in the pre-show and that is you are a avid and frequent and champion level tennis player. Is that right?

David Morin [00:02:50]:

David, you might have embellished the last part about that. But, but the first, the first two are true. Yes. Try to play four to five times a week, depending on schedule allowing. Try to be out and get active as much as possible.

Scott W. Luton [00:03:04]:

Man, that is outstanding. What a great workout. Four times a week. Because if you ever played tennis, folks, it is tough you stay moving, especially in real competitive games. Now, I got two questions for you about tennis. David, I want to ask you first. I mean, you know, there's some folks that pick up a racket and hit the ball around a little bit, but you are passionate and you've had quite the longstanding commitment and investment in the sport. And one thing you shared pre-show with me that I think is interesting and not just a tennis, but kind of universally with other hobbies, maybe even like leadership.

Scott W. Luton [00:03:36]:

And that's the opportunity with tennis to kind of get better almost each time you go out and kind of see that improvement, you know, over, over the longer haul. Tell us more about that.

David Morin [00:03:46]:

Yeah, you know, I think many of us can relate is I wish I knew the things I knew now as I did 20 years ago when I started play. So I think before I was young, highly competitive, wasn't a lot of strategy in what I was trying to accomplish on the court. But if I look back on the last 10 years, I think, you know, one, maybe not quite as fast as I used to be, so having to think a little more strategically on the court, but really feeling that sense of every time I go on a court, there's opportunity to improve. And if I look at the trend line, I think a lot of improvements and things to be proud of in terms of how that work and dedication and habit all pays off first and foremost for my fitness, but also for my tennis game at large.

Scott W. Luton [00:04:31]:

I'm so glad you brought up the strategic angle, you know, watching. And I'm not the biggest tennis lover, but I think we share a common admiration for one of the best of all time, if not the best of all time, Serena Williams. And watching, especially in her last March in the, in her last US Open and watching not the physical, the impressive physical side, but the impressive strategic and mental aspect of the game. It's, it's intriguing. So let me ask you, I might have let the cat out of the bag there, but what's, what's one or two of your favorite tennis pros of all time?

David Morin [00:05:05]:

Yeah, I think on, on the men side as a affinity for Rafael Nadal, I think, and then on the women's side and maybe all time is Ms. Serena Williams herself. And I think if you look at one thing they both share is an immense competitive tenacity and commitment to, you know, trying their hardest after every point. And I think there's a lot of champion mentality that I find a lot of inspiration from and how sometimes both of them, I think, play their best when their back's against the wall and really show up on court with that fire and kind of spirit that I think is great.

Scott W. Luton [00:05:41]:

Well said. And I'll tell you, if you haven't watched the movie, the name escapes me right now, but Will Smith plays her father, King Richard. Yes, yes, folks, check it out. Whether you like tennis or you don't like tennis, it's really a good, good story. Okay. Well, I feel like we could probably take a deep dive into all sorts of elements of the tennis universe, but we got a lot of good stuff to get into here today. Again, about one of our favorite topics. So I want to share a little context with our audience here.

Scott W. Luton [00:06:08]:

David, so Narvar works with over 1500 retailers around the world. If you would, for a little context, shed some light on what the organization does kind of in a nutshell and what you do in your role.

David Morin [00:06:20]:

Sure. So Narvar is a post-purchase customer experience platform and we really set out to think about how do retailers give their consumers the best experience while they engage with the brand immediately, at the time of purchase and everything that happens after purchase. I would also call out that while we think about customer experience as our one of our primary values back to the industry, increasingly over the last maybe 5ish years, we've also layered in what is the retailer experience. So we think both from the consumer side, what is the experience that we help retailers deliver to their consumers? And then we also are starting to think a lot more on the retailer side. What are the tools and information that Narvar can give to our retailers to really think out what that retail retailer experience is? In my role? Well, my time at Narva, I am close to celebrating my seventh year anniversary, which is exciting. I've always had the customer front and center to everything that I've done. Working directly, owning some relationships, helping organize and grow a team that was responsible for client relationships. And in my current role, really thinking more at the thought leadership and executive level of how Narvar really shows up for our retailers, thinking about what are trends that we see overall in the wider retail industry.

David Morin [00:07:42]:

What are some of the core values and products that Narvar continues to develop to meet those trends and then what else are we hearing from our retailers of some of the trends that they're having pained within their business, problems they're looking for solve and how do we bring all of those three things together to deliver solutions and strategic guidance to our partners to really help uplevel the entire industry?

Scott W. Luton [00:08:05]:

Oh David, I love it. And folks, you don't have to hear it from me here. We've heard so much about the critical customer experience, right. And how organizations that put data at Northstar are doing incredible things, right. Creating raven fans. But David, I love your what you are sharing there about the retailer experience and how that's emerging because all voices need to be represented as they kind of build the matrix that you're describing. So I love that.

Scott W. Luton [00:08:32]:

What I also enjoyed David, I've been doing my homework on you a little bit. I came across some great interviews you conducted and were interviewed at Shoptalk Fall 2024. I saw at least one of your interviews there. Seems like your team was there en masse. What were a couple of things that leaders were talking about, some of your key takeaways there, I guess.

David Morin [00:08:53]:

Sure. Well the first one I think is the most obvious. It has been the major theme across every conference I've been at this year and really the entire world, which is AI and how are companies thinking about using AI to automate business processes, to better operationalize workflows, to use data in more compelling ways. What is exciting, even if I think about where the year started, where AI was a buzzword, is if I look back on Shoptalk this year, including Narvar's own message at Shoptalk is even after only 10, 11, 12 months we're starting to see a lot more real world use cases of how retailers and like companies are starting to use AI to harness the power of data to be more intelligent about the decisions they make work a lot quicker in some of decisions. For example, I've seen services now around better pricing algorithms. You know, some business processes that used to be highly manual and calculative can now be solved. Thinking more about using AI on the personalization end to drive conversion and acquisition or even if we think on the Narvar end and of course we'll touch on this is how are we using AI to help protect retailers businesses. The second one that was super loud and clear at Shoptalk this year was the emergence of omni or unified commerce.

David Morin [00:10:13]:

I think pre COVID there was this big surge into this idea of omnichannel. How are retailers building out connected experiences in the offline and online world? Obviously with COVID some of those things went a little dormant as all things shifted online. And I think what we're really seeing now, especially in one set of the business is this reemergence or refocus on unified commerce or omni commerce. As more retailers are thinking about what is the digital experience, what is the physical experience and how are they helping connect or blend those so that the consumer can engage with brands, no matter the channel, you know, no matter the entry point in a really clear and consistent way.

Scott W. Luton [00:10:53]:

Man, I wish we could do a whole podcast series on those themes. I want to go back to the first one being AI because it's seemingly the golden age. But one of my favorite things, you kind of mentioned this too. I love the like every day it feels like almost every hour we see a new practical outcomes delivered use case of organizations taking AI and in a focused measure, you're starting with a problem, working backwards to finding the right tools of the impact AI can have. Now get this, David, don't laugh at me. I just made like commercial pizza, okay. From the big chain stores, right? It's one of my guilty pleasures. My mind was blown a month or so ago as I realized that in my most recent order on the phone, an AI voice took my order.

Scott W. Luton [00:11:42]:

When they called it back to me, they got it wrong. I corrected them, they got my order right and I hung up and I did some Google searching. And of course this big chain was one of those. It's been experimenting with AI order taking. And I tell you, it's fascinating just to think about. I feel like I've already like traveled in the future, you know, as it relates to just my pizza orders. But David, tremendous opportunity and not around the corner stuff. Stuff that's already making an impact now that it seems like retailers as you described are taking full advantage of, huh?

David Morin [00:12:18]:

Absolutely. Like I said, watching, even the use cases and applicable use cases advanced so much since the start of the year. Narvar always kicks our year off at NRF in January. And I think again with buzzword to where we are now. You mentioned pizza, but we're seeing in the e-commerce industry AI taking over chatbots and IVR solutions and that real proliferation happened right now where it's not just gimmicky but it's actually providing real world value in a accelerated and increasingly frictionless way for consumers. If I think about my own experiences, maybe last year, the year before, you know, there's nothing more annoying than having to hit zero a bunch of times when you're on the phone like agent, agent, agent, whereas now we're really seeing AI being used more intelligently and also being so much stronger that as you pointed out, maybe you didn't even realize it, or if you did realize it, it didn't matter because their friction was so little that it actually solves your use case in a fast and quick way. And so if we've got that far in two years, like, where do we go from here in those use cases?

Scott W. Luton [00:13:23]:

Oh, no doubt. And of course you got 5, not 5G, but 5.5G. That's being rolled out globally. That's going to really unleash and even more empower AI use cases around the globe. Different industries. But I'm glad you mentioned those chatbots. They're so much more intelligent than they were just a year or two ago. So.

Scott W. Luton [00:13:43]:

And that's taking friction out. I mean, if a consumer can jump on whether to place an order or they're checking on something or solving a problem, I mean, let's face it, if we can get on in two minutes and have a bot fix it and then we can go on about our day, that's a great experience. All right, so folks, I want to offer up a resource here apart from David's key takeaways from these big things at shop talk fall 2024. We're about to get into talking returns management, especially return fraud. If you love this, these topics and these subject matter areas as much as I do, check out the eighth annual report that Narva's put out that's focused on the state of returns. Narvar puts this out each year. Lots of good stuff there and it's easy to find. Venture over to narvar.com N A R V A R dot com.

Scott W. Luton [00:14:32]:

You can download it and dive in just like I have. Okay, so David, switching gears to the topic at hand, I picked up this phrase that you were using in a pre-show called the silent crisis that we're seeing in retail. Tell us more about that.

David Morin [00:14:46]:

Yeah, I think we call it the silent crisis now, but it is getting louder and louder that I'm not sure if we have this conversation again next year we'll refer to it the silent crisis. But a couple of things have been happening over the last 5ish years and certainly in this post COVID world is things just look a lot different. The volume of business that is coming through digital channels and physical networks is heavier than ever. And what we've seen probably more intensely in the past 18 to 24 months than ever before is a huge acceleration of abuse. And in some cases, deliberate, intentional and criminal fraud of retailers and E commerce retailers, reverse logistics and returns policies, which is creating a big problem for the industry when it comes to costs of doing business and balancing. How do a retailer think about managing their costs with this new crisis while still providing an ultimate customer experience? And like, how do you balance those two? Pretty different ends of the spectrum.

Scott W. Luton [00:15:50]:

All right, so what you're saying, a couple of things I heard there, David. So if we talk next year about this time, instead of it being referred to as a silent crisis, it's going to be loud, boisterous and costly crisis, Is that right were tracking together there?

David Morin [00:16:03]:

Absolutely. I predict that for sure.

Scott W. Luton [00:16:06]:

And the second thing I think is a really, you know, kind of kidding aside, just like we're seeing in cargo theft, right, which has got to be a second cousin maybe to returns fraud, we're seeing not only the casual criminal engage, but we're seeing the rise of, of criminal syndicates and strategic approaches at big criminal and illegal and fraudulent action like you're talking about. And let's face it, just like the good folks have access to all the technology out there, unfortunately the bad actors do too. And don't be surprised that they put it to, you know, put it to bad use in their, in their criminal endeavors. All right, so I want to talk about, we just said earlier on the front, and I think I mentioned, you know, the critical topics of reverse logistics, returns management. While they continue to need to get more visibility, especially in global supply chain leadership circles, the good news is, at least in the last five years, I've seen it get more attention, get more conversations. That's a great thing. So I appreciate what you and Narvar and many other players out there are doing, including our friends Tony Shrouda at the Reverse Logistics Association. But I want to dial it in on one element in all of those areas, and that is return fraud.

Scott W. Luton [00:17:20]:

You just talked about how the acceleration of abuse is certainly having a bigger and bigger impact. Let's define return fraud to make sure everyone listening or watching is right there with us. What we're talking about with return fraud.

David Morin [00:17:33]:

Yeah. So I think when we think about return fraud, we think about it as a larger umbrella term. And there's many different ways that return fraud exists in the world. So as we think about return fraud, it is any abuse, either intentional or unintentional, of a retailer's return policy and returns network. And again, there's lots of different flavors of that. You know, one really common flavor that we still bucket under returns fraud. Sometimes we Call it more like friendly fraud is something like buying an item, wearing it once and returning it. You know, that's really kind of known.

Scott W. Luton [00:18:09]:

And adopted thing when it comes to friendly fraud. We're not talking about taking it home, trying it on and returning it. We're talking about like getting a dress or a suit and going to the event and then bringing it back. Right.

David Morin [00:18:22]:

So it's exactly okay. We also think about it sending an item back and putting the wrong item in the box, either mistakenly or in some cases, intentionally hoping that the retailer won't notice that it's the wrong item and still getting a refund all the way to, like I said, actual criminal intent. I think there's some really scary things happening right now, which is one criminal. True criminal syndicates are really finding ways to take advantage of retailers. But I think the more emerging trend we see right now is that with the proliferation of TikTok and Instagram and Reddit and sub communities is that there's starting to be a normalization of return fraud and returns abuse that is making everyday consumers who probably would never go into a store and take an item off a shelf feel like it's appropriate or acceptable to take advantage of a retailer's lenient policies. I'm sure many of us who are listening or who've been in this space can relate. There are actual videos happening on TikTok of like, hey, how to get a free item from X retailer. You know, order item, call the retailer, say I didn't get my item and ask for replacement.

David Morin [00:19:36]:

And so what we're seeing again is some versions of friendly fraud, which is expected but still causes some inventory and financial impact to retailers. Like that use case I mentioned around wearing once and returning and intentionally to kind of a middle ground of abusive policy. And then of course, to the very end of, you know, actual criminal intent of people buying and reselling or things of that nature.

Scott W. Luton [00:20:03]:

I appreciate you sharing that, David. And we're going to get into the impact you're kind of speaking to towards at the end of your response there. Because folks, whether you're in supply chain or outside of supply chain, you might be surprised at some of the tremendous impact it has kind of across the enterprise. But one thing I want to call out the 2024 State of Returns going back to some of the data y'all shared in the annual study. 15% get this folks. 15% do all of their shopping online. Right? That is an interesting and a much higher percentage than I would think and maybe most people would think. But where this is relevant here is that returns e-commerce orders are returned at a much higher rate than in person orders.

Scott W. Luton [00:20:49]:

And that's probably one of the factors that's contributing. Right. To the accelerated impact and sheer amount of return fraud that David's kind of calling out. The e-commerce orders returned at 17.3% versus the in person at only 10%.

David Morin [00:21:08]:

Right.

Scott W. Luton [00:21:08]:

It's a big, it's a big gap. And I'm looking to the right here, David, because I've got your wonderful report on a separate screen. I love this stuff. Geeking out here. Let's talk about challenges first. We'll get into impact in just a second. And this is really their neighbors, right. Impact and challenges are neighbors.

Scott W. Luton [00:21:23]:

Talk about how return fraud is presenting tons of challenges to especially our supply chain professionals community.

David Morin [00:21:32]:

Sure. Well, I think just to reiterate what you just called out, and I think that is a really important start of this conversation is the difference in return rates digitally versus physically. You know, one thing I say a lot is the living room is the new fitting room. And that is especially relevant for our e-commerce. Right. If you think about your own shopping, you're shopping online, you're not quite sure how it fits. Like, of course you're going to want to try it in a store. You pick it up, you take it to a dressing room with the three other things you want to try on and you have that tactical physical experience right there before you make your intent to purchase online that happens at your home.

David Morin [00:22:08]:

So yes, I think you are correct in calling out that that is the first kind of reason why we're starting to see this proliferation of returns abuse and returns fraud because of this accepted notion that things online likely are going to come back at a higher rate because really at the end of it, returns are about peace of mind. And consumers have to have that peace of mind in order to make that purchase intent. But with that peace of mind comes opportunity and risk for the retailers. Maybe the other thing I'll call out as well, because these are all tied is the kind of macroeconomic pressures that are being placed on all businesses, including retailers. Inflation is driving up the cost of goods, but also the cost of labor, which is being translated into the cost of shipping and the cost of operations. And coming out of COVID I know we're feels a little funky still saying that given that feels like a long time ago, but there was this huge acceleration of e-commerce volume that happened in COVID. You know, something that would have looked like a steady graph instead took a huge spike and so a lot of the things that probably would have happened in a very normal and organic way as steady acceleration grew, kind of step change the entire industry. So retailers are facing the inherent peace of mind.

David Morin [00:23:27]:

Living room is the new theater room challenge. They're seeing it at an accelerated pace than they expected. Given the step change that COVID happened. And coupled with the macroeconomic climate of increased cost of doing business, it's now created this big, big problem for retailers. Now what does that mean from the challenges themselves? One is that there is just overall the increased costs, not just from this impact to inflation, but from returns fraud itself. So as retailers are starting to really crack down on fraudulent abuse, it means that they're likely having to spend more resources in the reverse logistics network to actually look at the items, process the items, handle the items, restock the items, potentially dispose of non resellable items at a level of focus and detail that wasn't happening something like two or three years ago. The second piece that I would call out is really that inventory disruption. You know, retailers always are going to expect some level of shrinkage within their inventory.

David Morin [00:24:28]:

But as we see that this returns fraud and returns abuse is really accelerating, there's now an even greater chasm or gap in an inventory. So they're having to think more about how do they manage that inventory, how do they properly forecast inventory, how does that lead to decisions around overstocking or stock outs. And so just inventory management as a whole becomes a lot more challenging if there's a lack of predictability in what's coming back, in what form, in what time. And then there's also like a customer experience and logistics burden. One of the things that we saw really common in COVID is given the kind of immense and accelerated volume, a lot of retailers tried to take some consumer focused or consumer friendly new policies such as returning customers earlier on in the return cycle, which reduced some of their operational pressure. But as we've now had this silent crisis become a lot more loud or louder is that retailers have been forced to rethink those processes. And likely what we see now was the more common is waiting until receipt and inspection to refund. Which puts a lot more pressure on the entire reverse logistics supply chain and decision making of thinking how do they actually operationalize a network that is cost effective, timely, consumer-focused, predictable and in some ways all four of those things are polar opposites of each other, and so finding that middle ground is really where we are today.

Scott W. Luton [00:26:01]:

David, that's like a four minute masterclass in the sheer complexity and Headaches returns are a great thing, right? We know that brands is what customers demand and coming up with smart returns policies is important as well as the talent of the supply chain side of folks that can really specialize and optimize reverse logistics, returns management and all that goes with that. But fraud is this bad actor and it brings so much more complexity. You know, we're talking pre-show David. I talk about this all the time. So artists, I bet our audience is like, all right, Scott, I've heard this 17 times this month, but I think it's really important. Years ago I had the great opportunity of touring a retailers one of their at the time three returns processing centers. Right now I think they've got four. And at the peak of the season each year they were processing 300 tractor trailers full of return merchandise coming back.

Scott W. Luton [00:27:05]:

And of course as part of the tour I didn't. They don't say, hey, this is probably fraud and this is probably, you know, they don't do that. But the sheer scope and complexity and the assessing and then the refurbishing and then the returns going back to potentially the omega, you name it. It is fascinating and I think our supply chain community might be better off, especially folks that are on the forward side, the traditional side I'll call it. Go out and venture and visit and consumers maybe venturing and visit some of these returns processing centers. I'm telling you that's a monumental task. And ask for our supply chain teams out there. And fraud makes it so much worse.

Scott W. Luton [00:27:45]:

And it doesn't stop there David, because let's talk about the financial impact of return fraud. So we've talked about the supply chain complexity resource and more side let's talk about the financial impact there.

David Morin [00:28:01]:

Yeah, I think you highlighted some really great topics. I agree. I think everyone should visit a distribution center or a place where returns go at least once. I've done that many times with a lot of our customers. And what you see is amazing. One, the pure volume and also automation that happens in those channels is really incredible. But on the other side is really seeing all of the crazy things that come back. I've seen keys, cell phones, CD cases, just really interesting things that people get back that, you know, these supply chain teams and DC teams are having to manage.

David Morin [00:28:40]:

And what does that account for? I think the stat that we always look back on was published by the Interf this year and what they estimate is that the total amount lost due to returns, abuse and fraud in 2023 was over $100 billion, which is pretty incredible. The other data point that I've been leaning on and came from a advisor of ours or analyst in our network is what is the total cost for a retailer of processing a return, especially those returns due to fraud or abuse. And one stat that we've seen is that it costs some retailers upwards of 70 to $80 all in just to process a return. And that's actually a number that when we talk to retailers, they haven't even thought about because that number is trying to include not just the cost of shipping and the cost of receipt, but actually all of the other kind of underlying backend operational processes that go into actually, you know, accounting for true cost of returns. So labor, not just of the DC team, but of your finance team, who has to do the reconciling of your inventory team, who has to audit your inventory, the cost of shrinkage, you know, resell, like kind of an all in, 70, 80. And if you think about it in that lens, that is a really expensive cost of processing something back, especially for companies whose average order value might be either right out that number or less than that number. And so in many ways, some retailers are actually taking a loss on accepting returns, which really I think highlights why this area is growing in concern and focus for the industry.

Scott W. Luton [00:30:23]:

First off, 100 billion in one year. That's 2023 of the costs associated associated for her to write with a return. Fraud and abuse. Is that right, David?

David Morin [00:30:34]:

That is right, yes.

Scott W. Luton [00:30:35]:

Oh my gosh. And then the per return, right. And the $80 kind of the all in. You know, think for an organization that might, you know, sell 10 million items a year and then let's say those are in store purchases, just looking at the data, 10% is returned. So they're gonna be processing a hundred thousand returns times that 70 to $80 per return. Holy cow, my brain goes right to. It's a tremendous opportunity. It's a tremendous opportunity to not only continue to delight our customers, we know there's gonna be a certain percentage of bad actors across the globe in no matter what part of humanity.

Scott W. Luton [00:31:15]:

But we can do more to mitigate and to lessen the impact both financially from a supply chain organization standpoint. So folks, if you think you've heard it all, just wait, there's more. Let's talk about the operational impact. David. Goodness gracious, tell us more.

David Morin [00:31:36]:

You called out something again that I think is important. So while we know there's a problem, the reality is the problem is driven by a very small set of consumers. I would generally apply the same 80, 20 rule here, and maybe even more like 80 10, which is 80% of the fraud or more, is probably being driven by, you know, 10% or less of your consumer base. But the challenge is that that number is so big that whether it's 10%, 5% or 20%, it still is a problem. And so you're right, I think there's a huge opportunity there as well, is if we can help reduce that 5 to 10%, you're going to cut out 80% of your fraud. And then the possibilities are endless for really thinking about how you orchestrate your reverse logistics network and your returns program to drive consumer loyalty, which is what we touched on at the top in terms of operations, it's all centered around the same thing, which is if retailers are concerned about returns fraud and returns abuse, it's meaning that they're having to put a lot more resources operationally on managing the reverse logistics program. Things like ensuring that someone is unboxing and looking at every single item and grading and validating every single item, it comes back huge operational strain there, a lot more quality control issues as an association. So really having to put the right SOPs in place at a DC to ensure that those quality checks are happening to make sure that the goods that you think are coming back are those goods and are they in a sellable state? Again, we've already touched on it, but I'll talk about it again, which is how does that all tie to inventory management and your inventory system leading to likely inaccurate inventory? And how does that impact your overall merchandising stream as you think about the sell through? And then all of this leads to increased costs at every step of those channels.

David Morin [00:33:32]:

And then the other thing I would call out is what is the customer satisfaction risk? So all of the things I've just mentioned, which are a huge operational problem likely are meaning that there is a slowdown in overall refund timing and refund processing. And the only thing worse than waiting for the item you bought to come to you is waiting for your refund on the item you returned. And so if a retailer is having to invest a lot of resources and time and getting something back and validating it, it likely means that the time to refund is being slowed down. And so there's also this now impact to customer satisfaction, which potentially could also impact customer acquisition and conversion and retention in the future.

Scott W. Luton [00:34:15]:

Yeah, David, as you kind of shared, especially at last thought my brain, it took me back to grade school because there are certain things that don't change for eternity and that is When a few bad actors do what they do, we all suffer. We all suffer. And kind of what you were talking about there is when teams have to jump on these potential return fraud and abuse scenarios, it certainly pulls time, energy and attention to engaging the majority of the consumer world out there that are just trying to complete a transaction or to return something for, for all legitimate reasons. So that's a great, great call out, David. And it's all the more reason whether it's supply chain impact, financial impact, operational impact, consumer based impact. Right. All that rolls up into that in many ways, employee experience impact. That ways it rolls up into that into the good news is that there are things we can do today, David, you and your team are helping organizations do to instill and implement a better way.

Scott W. Luton [00:35:21]:

Right. Refreshing approaches that really address the opportunity without sacrificing that critical customer experience. So tell us if you would about some approaches that you find have been proven to address some of the return fraud challenges that you've identified here.

David Morin [00:35:40]:

Well, the first thing I would call out is there is an increasing importance now for every retailer to better know your customers. Narvar has long thought, and we're starting to really see this happen now is that a one size fits all returns program and returns policy is likely not sustainable for most retailers. So how do you better know who your customers are? And as you get to know your customers, how do you start to build out programs that can still reward them while protecting your base? So this year alone, and I think we'll see it for the next two years, is a lot more retailers are investing in and launching both membership and loyalty programs as effective customer acquisition ways to know more about their customers. You know what that means is the more you know about your customers, the more you might be able to build programs that reward your best customers and the best behavior, you know, free return shipping for your top tier customers, longer return policy just for your top tier customers. But what that also means is the inverse that people who maybe are not your top tier customers or maybe more casual customers, you still give them a good experience, but think about ways to protect it. So maybe you will force them to take A E credit instead of an original form of payment refund or things of that nature. The next thing that we look at today is that consumers today are exponentially less likely to intentionally defraud you if they're going through what we call a boxless return drop off. So many consumers today have had what we call a boxless returns experience with Amazon for years, potentially at a Whole Foods or A Kohl's.

David Morin [00:37:13]:

And what we see in our network there too is that again, people are less likely to defraud you in those networks. You know, it's really hard to take a pile of bricks to Kohl's and say, here's my t-shirt. And so, you know, what are ways which you can use that mindset to push customers to those experiences knowing that they are less likely to take advantage of those policies today on the Narvar side, what we are working on with our retailers is how do we use AI to better understand and protect against potential fraud? By looking at kind of behavior as a whole and giving some signals to our partners about how to incentivize behavior, thinking about different signals to potentially call out, hey, for this package you maybe want to wait until return receipt because there might be some potential fraud associated with it. Hey, for this package maybe you want to force them to go to a boxless experience because there might be some fraud. Or conversely maybe for this package you want to offer an advanced refund at drop off because the likelihood of fraud is really, really low that you can actually build out a best in class customer experience.

Scott W. Luton [00:38:23]:

David, I love your response there. You talk about some, some physical process changes, right? We can make you talk about some customer segmentation or nuanced return policy approaches we can take. Of course, you let off with we gotta know our customers better. And you know, in this day and age we have a tremendous opportunity to do just that. And then you kind of wrapped on, of course, pulling a big old lever on modern technology and applying that as appropriate to what we're trying to do here. I love it. My hunch, David, is given all of that and given all the different successful brands you all work with around the globe that you're able to offer new customers a library of these best practices in different sectors and different types of retail environments. I bet that's a, that's quite an advantage of folks working with you and the Narvar team is my hunch, huh?

David Morin [00:39:23]:

Absolutely. One of the things we talk a lot this year and going forward is this idea of the Narvar network. And to me there's so many things that that means and you called out one that's probably the most near and dear to my heart, given all the work that I've done at Narvar over the last seven years, is how do we actually tap into our experience working with these 1500 plus retailers over the last 12 to 15 years and take out all of the best practices and things that we've learned together as the industry and really provide that back to our customers as strategic consulting and strategic partnership so that we can take something that worked on retailer X and apply it to retailer Y either to advance conversion or drive revenue or protect against risk. So absolutely, one of the things that Narvar has invested in heavily is how do we really build out that program of best practices, examples, case studies, success stories to really share that back with our partners to think about how do they optimize every aspect of their post purchase program including reverse logistics and returns programs to really build out the best in class experience for them.

Scott W. Luton [00:40:30]:

David Love it. The Narvar Network big differentiator and I'm looking forward to having you back and we'll see how 2025, which you know, I'm optimistic. I think there's so many different things we can do better. Whether you're talking returns management and of course addressing return fraud and abuse, whether we're talking about, you know, the optimization of global supply chain management or just business and leadership. There's so many opportunities. But I love, I've appreciated our deep dive into this returns fraud problem that just is not going to go away because bad actors are going to do what they are going to do and they're going to find ways to exploit and try to ruin the rest of our experiences as good, honest customers. But hey, nothing's changed since the beginning of time. All right, how can folks connect with you and the Narvar team that's on the move? David sure.

David Morin [00:41:25]:

Well, the best way to get in contact with us today is through our website so corp.narvar.com but for any of the listeners who are going to be at any of the common conferences around retail e-commerce next year, be sure to look up for us there as well NRF, Shoptalk and many, many more where Narvar always is to connect with our customers, share more about how we're solving some of these industry problems and talk with the industry.

Scott W. Luton [00:41:49]:

And so David, with that in mind, I bet you'll be at the big show on the floor getting interviewed. It's called the Big show for a reason, folks. Was it a hundred over a hundred thousand folks attendees there? If I'm not mistaken, that's the place to be. So if you're going to be at the big show, come track down David Materine with Narvar. You'll be glad you did. I tell you, he is a walking encyclopedia of what's going on in retail right now and he's a joy to talk to and learn from. So big. Thanks David Morin, Vice President, Client & Retail Strategy with Narvar.

Scott W. Luton [00:42:24]:

Really appreciate you being here today, David.

David Morin [00:42:26]:

Thanks, Scott. Pleasure being here.

Scott W. Luton [00:42:29]:

Well, and good luck on your continued tennis conquests. Next time we'll see what you've added to your trophy trophy cabinet. But pleasure kidding aside, folks, you got to connect with David. Connect with the Narvar team. Check out the 2024 State of Returns report, chalk fill if you like what David shared here today. Right? Data, actionable insights and a whole bunch more. You'll love the report. You can connect with David, you can check out reportall@narvar.com, and you'll find that in the show notes, but N A R V A R dot com. Surely, folks, we can do better at returns management both as practitioners but also as consumers. And we got to embrace both of those critical responsibilities, right? So here's your homework. You got to take at least one thing you heard here today. I've got about 18 pages of notes on my end. Take one thing you heard, put it into practice. It's about taking action, deeds, not words. And with all that said, on behalf of the entire Supply Chain Now team. Scott Luton challenging you - do good, give forward, be the change that's needed. And we'll see you next time right back here in Supply Chain Now. Thanks everybody.

Narrator [00:43:40]:

Thanks for being a part of our Supply Chain Now community. Check out all of our programming at supplychainnow.com and make sure you subscribe to Supply Chain Now anywhere you listen to podcasts and Follow us on Facebook, LinkedIn, Twitter and Instagram. See you next time on Supply Chain Now.