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Critical Mass: Some Extra Credit: Managing Returns

NEW YORK — A shopper cracks open a lipstick to test the color. She doesn’t like it and puts it back into the rack.<br><br>Upon purchasing a new blush, a woman gets it home and finds the color looks different when she is out of the store....

NEW YORK — A shopper cracks open a lipstick to test the color. She doesn’t like it and puts it back into the rack.

Upon purchasing a new blush, a woman gets it home and finds the color looks different when she is out of the store. The chain she bought it from has a money-back guarantee, so she returns the opened package.

The mechanism in a new lipstick doesn’t work right and the disgruntled shopper takes it back — unhappy with the brand and the store.

These items have now become unsaleable for the retailer. Ten years ago, most retailers could simply return the products to the suppliers for credit. But returns have become such an expensive proposition for both buyers and sellers that some suppliers have cut off or reduced payments for returns.

An estimated $10 billion to $15 billion worth of items are returned per year. Beauty skews higher since there is a greater rate of return when consumers don’t like a color. Many chains such as Rite Aid and CVS also offer money-back guarantees, where shoppers can bring back any cosmetics they don’t like. Also, since beauty is fashion-driven, there are more frequent shade launches rendering existing stock out of date.

Returns have been a nagging problem of the mass beauty business for many years — and despite many complaints, there have been few solutions. With sales tightening in the beauty department, the returns issue is getting even more attention.

Some companies, such as Coty and Bonne Bell, still buck up for returns on nonpromotional items. “Bonne Bell has always been one of the best for handling returns,” said Sally Yanke, buyer for Medic Drug.

Buyers said L’Oréal has worked hard to create packaging that reduces returns. “Their mechanisms don’t fail that often,” said one source, “so we don’t have as many returns on their products. Some firms have lipsticks that don’t work well and we get many back.” Some retailers are also insisting on a guaranteed sales clause, especially with fledgling suppliers.

Retailers said Unilever is restating its terms for 2003 to be more retail friendly. Revlon is reported to be reworking its terms that were set forth two years ago.

Revlon would not comment on those changes for this article.

However, retailers said Revlon is proposing several alterations at press time. A number of chain representatives said Revlon is planning to offer retailers more advertising dollars to offset the cost to the chains of absorbing returned merchandise. As of last year, Revlon was doling out a percentage of the return charges based on each retailers’ sales.

Many chains, such as Kerr Drug, operate reclamation centers where returned merchandise is shipped and then scanned to come up with documentation for suppliers of what has been returned. Then some suppliers want the items back, while others prefer that the merchandise be sent to salvage. Barter is also becoming a choice of both retailers and suppliers looking to nab more money for merchandise they can’t sell.

“This is an issue [returns] that frequently comes up at our meetings,” said Jim Devine, president of the Chain Drug Marketing Association. “Perhaps raised awareness will contribute to new solutions to the problem.”

Karen Durham, divisional merchandise manager for Duane Reade, will depart that post and become a consultant for the chain as of Oct. 1. Durham, who spearheaded the launch of Duane Reade’s proprietary brand called Apt. 5, will continue to work on that brand with hopes of expanding it into other beauty care categories. Durham has more than 20 years of experience in the beauty business. Prior to joining Duane Reade in 1993, she was a buyer for Eckerd Drug.

Marti Bentley, the current buyer, will assume the dmm title.