Consumer Returns 2008 Creating and Implementing an effective disposition strategy to reduce the costs associated with Reverse Logistics and enhance asset recovery Ric Spicer, Manager Reverse Logistics and Recycling Wednesday, October 29, 2008

Discussion Topics Scope of Consumer Electronics Returns Reverse Logistics @ Circuit City Creating a disposition system to determine whether a product is: Returned to Vendor Refurbished and resold in the store Remarketed through alternative channels Recycled Building awareness of vendor master agreements into your disposition systems, to ensure all valid items are returned to vendor Configuring your diagnostics and disposition systems to deal with outstanding product and brand variety

Scope of Consumer Electronics Returns

Reverse Logistics @ Circuit City

Creating a disposition system to determine whether a product is:

Returned to Vendor

Refurbished and resold in the store

Remarketed through alternative channels

Recycled

Building awareness of vendor master agreements into your disposition systems, to ensure all valid items are returned to vendor

Configuring your diagnostics and disposition systems to deal with outstanding product and brand variety

Scope of Consumer Electronics Returns $11.0 Billion in CE Product returns and Exchanges in 2008 25% result in cash reimbursement, credit card reimbursement or store credit 39% made a similar purchase at a different store Cost to Industry: $1.4 Billion

$11.0 Billion in CE Product returns and Exchanges in 2008

25% result in cash reimbursement, credit card reimbursement or store credit

39% made a similar purchase at a different store

Cost to Industry: $1.4 Billion

Scope of Consumer Electronics Returns Two year rate of returns continues to decline 27% in 2004-05, 23% in 2007-08 Overall return rate for the past 12 months is 27% (including Accessories) Loyalty to brands or retailers not adversely affected by product returns

Two year rate of returns continues to decline

27% in 2004-05, 23% in 2007-08

Overall return rate for the past 12 months is 27% (including Accessories)

Loyalty to brands or retailers not adversely affected by product returns

Scope of Consumer Electronics Returns Top 3 Reasons for Returns: Did not work as thought: 34% It broke while I was using it: 31% It did not work out of the box: 24% Least cited reasons for returns: Found a better deal: 6% No longer wanted: 10%

Top 3 Reasons for Returns:

Did not work as thought: 34%

It broke while I was using it: 31%

It did not work out of the box: 24%

Least cited reasons for returns:

Found a better deal: 6%

No longer wanted: 10%

Scope of Consumer Electronics Returns When making their return: 69% of consumers received an exchange 42% got the same brand and model 14% got the same brand but a different model 13% got a different brand and different model 14% got a refund 3% took a store credit

When making their return:

69% of consumers received an exchange

42% got the same brand and model

14% got the same brand but a different model

13% got a different brand and different model

14% got a refund

3% took a store credit

Scope of Consumer Electronics Returns In order to reduce returns, Guests would like to see: Better in-store displays (21%) Receive better information from the Sales Associate

In order to reduce returns, Guests would like to see:

Better in-store displays (21%)

Receive better information from the Sales Associate

Reverse Logistics @ Circuit City: Guest & Vendor Service Begins when our Guest enters the store with a return… …ends with reconciliation between Vendor and Merchandise Payables And EVERYTHING in between!

Begins when our Guest enters the store with a return…

…ends with reconciliation between Vendor and Merchandise Payables

And EVERYTHING in between!

Reverse Logistics @ Circuit City: Scope Management of: Return to Vendor/Risk Recall/Liquidation Physical & Electronic locations Distressed Inventory AS/400 Product Disposition Information Returns Management Reporting Consumer Electronics Recycling Rechargeable Battery and Cell Phone Recycling

Management of:

Return to Vendor/Risk Recall/Liquidation Physical & Electronic locations

Distressed Inventory

AS/400 Product Disposition Information

Returns Management Reporting

Consumer Electronics Recycling

Rechargeable Battery and Cell Phone Recycling

Reverse Logistics @ Circuit City: Cross Functionality Vendor Relations Merchandise Payables Logistics Distribution Inventory Accounting Inventory Management Executive FP&A Home Delivery Advertising IT Store Directors guest Service Associates Product Flow Team Operations Managers Internal Audit DMG Merchandising Store Operations Firedog Asset Protection Business Development CC Direct Corporate Communications Service The City The Source Training RVPs/ROMs/DOMs

Vendor Relations

Merchandise Payables

Logistics

Distribution

Inventory Accounting

Inventory Management

Executive

FP&A

Home Delivery

Advertising

IT

Store Directors

guest Service Associates

Product Flow Team

Operations Managers

Internal Audit

DMG

Merchandising

Store Operations

Firedog

Asset Protection

Business Development

CC Direct

Corporate Communications

Service

The City

The Source

Training

RVPs/ROMs/DOMs

Creating a disposition system to determine whether a product is: Return to Vendor Within your Returns Policy Guidelines? 14 or 30 days Within Vendor Agreement Guidelines? Received from vendor within 6, 12, 18 months? Damaged upon Delivery? Open the box in front of the guest? Abused Product? Obvious visible damage at point of return Missing parts? Reason for return? Why is it always “not working” or “broken”?

Return to Vendor

Within your Returns Policy Guidelines?

14 or 30 days

Within Vendor Agreement Guidelines?

Received from vendor within 6, 12, 18 months?

Damaged upon Delivery?

Open the box in front of the guest?

Abused Product?

Obvious visible damage at point of return

Missing parts?

Reason for return?

Why is it always “not working” or “broken”?

Creating a disposition system to determine whether a product is: Refurbished and resold in the store Engage guest at time of return Is guest Service Associate or Technician responsible? Inspect product after return Training is critical SOPs help create consistency Eliminate costs of transportation and handling at Product Return Centers Product available for sale… Unopened product Return to shelf immediately

Refurbished and resold in the store

Engage guest at time of return

Is guest Service Associate or Technician responsible?

Inspect product after return

Training is critical

SOPs help create consistency

Eliminate costs of transportation and handling at Product Return Centers

Product available for sale…

Unopened product

Return to shelf immediately

Creating a disposition system to determine whether a product is: Remarketed through alternative channels Open market web sales Contracted third party vendors Bulk sales of mixed products Eaches sales eBay style Selected large quantities of single SKUs Contract through limited buying groups capable of quick and reliable funding

Remarketed through alternative channels

Open market web sales

Contracted third party vendors

Bulk sales of mixed products

Eaches sales eBay style

Selected large quantities of single SKUs

Contract through limited buying groups capable of quick and reliable funding

Creating a disposition system to determine whether a product is: Recycled Handled in parallel to Consumer Returns Challenges: Guest services Warehousing & Logistics Transportation Consolidation Responsible Reuse/Recycling/Destruction

Recycled

Handled in parallel to Consumer Returns

Challenges:

Guest services

Warehousing & Logistics

Transportation

Consolidation

Responsible Reuse/Recycling/Destruction

Building awareness of vendor master agreements into your disposition systems, to ensure all valid items are returned to vendor Product Receipt – Induction of inventory at Distribution Center Where is it? How Much do we have? When did we last receive it? Starts Returns Timeclock SiRas implementation Guest Purchase Capture information at Point of Sale Guest Return Capture information at the Point of Return Condition of product Eligible for return? Replacement? Service? Warranty? Accessories included? Charges for missing accessories?

Product Receipt

– Induction of inventory at Distribution Center

Where is it?

How Much do we have?

When did we last receive it?

Starts Returns Timeclock

SiRas implementation

Guest Purchase

Capture information at Point of Sale

Guest Return

Capture information at the Point of Return

Condition of product

Eligible for return? Replacement? Service? Warranty?

Accessories included? Charges for missing accessories?

Building awareness of vendor master agreements into your disposition systems, to ensure all valid items are returned to vendor Returns Destination – Maintenance of the RTV system in the AS/400. These screens feed to all POS systems and provides Store Associates with disposition for Guest returns – Return to Vendor (RTV), Service or Liquidation. Return Authorization Management – Request and follow up on aging RA requests on behalf of the PRC’s to ensure returns move as quickly as possible. Vendor Receipt Discrepancy Management In-Transit Damages Over/Short Pricing Discrepancy Eligibility discrepancy

Returns Destination

– Maintenance of the RTV system in the AS/400. These screens feed to all POS systems and provides Store Associates with disposition for Guest returns – Return to Vendor (RTV), Service or Liquidation.

Return Authorization Management

– Request and follow up on aging RA requests on behalf of the PRC’s to ensure returns move as quickly as possible.

Vendor Receipt Discrepancy Management

In-Transit Damages

Over/Short

Pricing Discrepancy

Eligibility discrepancy

Configuring your diagnostics and disposition systems to deal with outstanding product and brand variety Centralized Management Vendor relations management Data management Data Management Group Reverse Logistics Cross Functional communication Changes communicated to Reverse Logistics for update

Centralized Management

Vendor relations management

Data management

Data Management Group

Reverse Logistics

Cross Functional communication

Changes communicated to Reverse Logistics for update

Configuring your diagnostics and disposition systems to deal with outstanding product and brand variety Web/Direct Purchases Can be returned to Circuit City stores Not available for Open Box sale Process through normal Reverse Logistics channels

Web/Direct Purchases

Can be returned to Circuit City stores

Not available for Open Box sale

Process through normal Reverse Logistics channels

Consumer Returns 2008 Creating and Implementing an effective disposition strategy to reduce the costs associated with Reverse Logistics and enhance asset recovery Questions??