Strategy and Implementation Summary
QuickReturns will focus its marketing efforts on e-tailers, catalog merchants and click-and-mortar stores selling common products with higher-than-average return rates. Revenues will be generated through return and exchange processing fees and membership fees.
5.1 Competitive Edge
QuickReturns will approach the returns market with the following competitive advantages:
- Strict focus on returns. QuickReturns will focus solely on the returns services market. Its management will not be distracted by competing priorities within the organization, making it more responsive to changing market conditions and customer requirements.
- Better value proposition to retailers and their customers. QuickReturns will offer a service array broader than that of any other company. Only QuickReturns offers consumers physical return locations with instant refunds, free shipping, and the opportunity to exchange merchandise; and only QuickReturns offers retailers product inspections, return processing, and shipping destinations tailored to the product and the reason for its return.
- Brand differentiation. The QuickReturns brand will be promoted as a consumer seal of approval, focused solely on returns, and undiluted by unrelated service offerings. The branding strategy will be aimed at developing a virtuous cycle in which consumers demand QuickReturns affiliation when choosing among retailers, and retailers advertise their QuickReturns affiliation in order to drive sales.
- Distribution partnerships. By partnering with multiple distribution channels ranging from brick-and-mortar stores to home delivery services, consumers will have more return channels to choose from than are offered by any other company. QuickReturns will benefit from a wide range of points of presence through which consumers can access the services.
5.2 Marketing Strategy
Consumer marketing strategy
Two factors will alow QuickReturns to build consumer awareness of its services with less advertising than typical start-ups:
- Retailer partners will have every incentive to inform their customers of the QuickReturns service. QuickReturns affiliation will differentiate them in the marketplace as merchants committed to customer care. Moreover, retailers will receive a higher ROI on their annual fee to the extent that more of their customers use QuickReturns. To this end, it is expected that retailer partners will promote QuickReturns in their own advertising campaigns. QuickReturns will also develop a graphic seal for retailer partners to display on their websites and in their catalogs. The electronic version of this seal will link to the QuickReturns website, where consumers can obtain information about the QuickReturns program.
- Consumers wishing to return merchandise will likely discover QuickReturns on their own when they read instructions from the retailer on how to return merchandise. Receipts or packing slips from QuickReturns partners will describe how to use the QuickReturns service and list the nearest location for each customer based on his or her ZIP code. Customers who contact the retailer directly to inquire about returns likewise will be informed about the QuickReturns service.
QuickReturns will have a website at www.quickreturns.net with information on the QuickReturns services, procedures, benefits to consumers, links to retailer partners categorized by product category, and a location finder linked to online maps. The site will be designed for easy navigation and access to company information.
QuickReturns media advertising will convey two key concepts:
- It will describe the service and its benefits to consumers in order to raise customer awareness.
- It will position the brand as a seal of approval that denotes convenient, hassle-free returns and high-quality customer service.
Advertisements also will contrast the positive experience of returning products through QuickReturns against the potential pitfalls of returning products through other means. Marketing campaigns will be intensified around the holiday season, when the majority of returns occur. Radio, magazines, and billboards will be emphasized over television as the preferred marketing channels in order to realize greater return on marketing investment.
Retailer partner marketing strategy
Retailer partners will be approached once a relatively firm technology completion date has been set and a distribution partner secured. Business development and operations executives will be contacted directly at retailers that are best suited for QuickReturns. The table below outlines the desirable retailer partner characteristics.
|Sells merchandise with high return rates||More returns generated per retailer partner|
|Simple and ordinary products||Faster and more accurate inspections|
|Return difficulties act as barrier to sales||Looking for solutions to returns problem|
|Customer service focused||More likely to become QuickReturns partner|
Distribution partner marketing strategy
Striking favorable agreements with the proper distribution partners is critical to the success of QuickReturns. A number of attractive potential distribution partners have been identified. Soon after securing its funding and technology partner, QuickReturns intends to approach the senior management of these companies. Approaching potential distribution partners at that time will strengthen QuickReturns’ negotiating position and minimize intellectual property risks.
In its initial roll out, QuickReturns will focus business development efforts on office superstores and parcel depots. Not only do these stores offer the shipping services necessary for QuickReturns operations, but they share synergies with QuickReturns customer segments. Consumer traffic accounts for 40% of sales for office superstores, and likely accounts for an even higher portion in the parcel depot market. Five chain stores have been selected as the top choices for QuickReturns partnership.
5.2.1 Pricing Strategy
Initially, retailer partners will incur four different fees, as summarized in the following table, and discussed in detail below.
|Charge to retailer||Timing|
|Annual membership fee||Annually (instituted after year two)|
|Technology integration fee||At systems integration (abolished after year two)|
|Return processing fee||At returns processing|
|Product exchange fee||At purchases with QuickExchange terminal|
Annual membership fee
QuickReturns will charge each retailer partner an annual fee of $250,000, approximately the cost of a single 30-second network TV commercial. The annual fee will be waived in QuickReturns’ first two years of operation in order to acquire a critical mass of retailer partners. This fee will be used to cover technology development and maintenance, liability costs, and marketing expenses. Payment of the annual fee will include:
- Right to offer their customers the option of using QuickReturns
- License to use the QuickReturns brand in their marketing campaigns/materials
- Monthly return analysis reports.
Technology integration fee
In lieu of the annual fee for the first two years, QuickReturns will charge retailer partners a one-time $60,000 technology integration fee, intended to cover the costs of integrating the retailers’ databases with the QuickReturns system. The fee is based on estimates of labor and material costs incurred by QuickReturns personnel who will be on-site through the integration period. The fee will be eliminated after year two, when it will be incorporated into the annual fee.
Return processing fee
The return processing fee will be incurred after each return transaction and will be based on the number of inspection criteria set forth by the retailer for a given product return. A base fee of $4.80 will be charged for each return handled by QuickReturns. The base fee will cover up to five inspection criteria, specified by the retailer, which QuickReturns agents will ensure are met before accepting a return. A surcharge of $0.50 will be levied for each criteria over the fifth.
Processing fee rates are designed to reflect the cost structure of returns. Returns with more criteria will result in higher liability exposure for QuickReturns because of the higher likelihood of human error. Returns with more criteria also will be more costly to distribution partners because of the additional employee time required to complete each transaction.
It is projected that retailer partners generally will establish higher numbers of criteria for products that are more complex and thus more expensive. In this way, the fee should correlate loosely with the product’s purchase price. QuickReturns projects that retailers will choose to pay the base rate of $4.80 for 80% of products, and will choose to pay for an average of two additional criteria for the remaining 20% of products, resulting in an average fee of $5.80 for the latter group.
Return processing fees will rise by five percent per year, starting in year three.
Product exchange commissions
QuickReturns will charge a product exchange commission of 10% of the purchase price for purchases made through QuickExchange terminals. This commission is in line with the standard 10% to 15% commission that e-tailers now pay referring websites. For the same commission, QuickReturns offers greater value than the average referring website, by providing customers with a computer, Internet connection, and direct link to retailers’ website.
5.3 Sales Strategy
To initiate and close sales, QuickReturns’ top management will be personally contacting the marketing and business development managers of the selected list of target retailers. Customer service and quality control will be the key factors in determining the clients’ decision to outsource their reverse logistics to QuickReturns. Sales and marketing efforts will be directed to ensure the ongoing relationships with such retailers.
5.3.1 Sales Forecast
Our sales revenues will be derived from three primary sources:
- Annual fees from retailer partners
- Return processing fees
- Commissions from purchases and exchanges made at QuickReturns locations.
The following sales forecast is based on the following assumptions:
- Annual retailer partner fees are waived in years one and two. Starting from year three, annual fees are $250,000 per retailer. These fees will be pro-rated for new retailers based on their activation date. (Note: by the end of year three, QuickReturns estimates to have 76 retailer partners; however, the table below shows a different number in order to accommodate for the lower total annual revenues due to pro-rating of such fees.)
- In years one and two, each new client pays a one-time technology integration fee in the amount of $60,000 in order to recover direct costs of integrating QuickReturns system into the retailer’s database. These fees are not pro-rated. Neither annual partner fees nor technology integration fees are shared with franchisees.
- It is estimated that on average one new retailer per month will join the QuickReturns program in year one and three retailers per month will join in years two and three.
- Return processing fees are shared with the distribution partners at a ratio of 1:1 (i.e., QuickReturns receives 50% of those fees).
- Product exchange fees are based on a 10% commission off the average product exchange value of $42. These fees are also shared with the distribution partners at a 1:1 ratio (i.e., QuickReturns receives 50% of those fees).
|Year 1||Year 2||Year 3|
|Technology Integration Fee (one-time)||4||36||0|
|Annual Membership Fee||0||0||60|
|Return Processing Fees||66,180||6,337,390||20,677,114|
|Product Exchange Fees||13,236||1,267,477||4,135,419|
|Total Unit Sales||79,420||7,604,903||24,812,593|
|Unit Prices||Year 1||Year 2||Year 3|
|Technology Integration Fee (one-time)||$60,000.00||$60,000.00||$0.00|
|Annual Membership Fee||$0.00||$0.00||$250,000.00|
|Return Processing Fees||$2.50||$2.50||$2.63|
|Product Exchange Fees||$2.10||$2.10||$2.10|
|Technology Integration Fee (one-time)||$240,000||$2,160,000||$0|
|Annual Membership Fee||$0||$0||$14,875,000|
|Return Processing Fees||$165,450||$15,843,475||$54,277,424|
|Product Exchange Fees||$27,796||$2,661,702||$8,684,380|
|Direct Unit Costs||Year 1||Year 2||Year 3|
|Technology Integration Fee (one-time)||$0.00||$0.00||$0.00|
|Annual Membership Fee||$0.00||$0.00||$0.00|
|Return Processing Fees||$0.00||$0.00||$0.00|
|Product Exchange Fees||$0.00||$0.00||$0.00|
|Direct Cost of Sales|
|Technology Integration Fee (one-time)||$0||$0||$0|
|Annual Membership Fee||$0||$0||$0|
|Return Processing Fees||$0||$0||$0|
|Product Exchange Fees||$0||$0||$0|
|Subtotal Direct Cost of Sales||$0||$0||$0|