Return merchandise authorization (RMA) explained

  • Return merchandise authorization (RMA) explained

    Posted by Paul Gordon on October 25, 2022 at 1:38 pm

    What is a return merchandise authorization (RMA)?

    RMA stands for return merchandise authorization. It is a numbered authorization provided by a mail-order or e-commerce merchant to permit the return of a product and receive a refund, replacement, or repair during the product’s warranty period.

    Many retailers will accept returns provided that the customer has a receipt as a proof of purchase, and that certain other conditions, which depend on the retailer’s policies, are met. These may include the merchandise being in a certain condition (usually resellable if not defective), no more than a certain amount of time having passed since the purchase, and sometimes that identification be provided (though usually only if a receipt is not provided).

    In some cases, only exchanges or store credit are offered, again usually only without a receipt, or after an initial refund period has passed. Some retailers charge a restocking fee for non-defective returned merchandise, but typically only if the packaging has been opened. While retailers are not usually required to accept returns, laws in many places require retailers to post their return policy in a place where it would be visible to the customer prior to purchase. In certain countries, such as Australia, consumer rights dictate that under certain situations consumers have a right to demand a refund. These situations include sales that relied on false or misleading claims, defective goods, and undisclosed conditions of sale.

    There are various reasons why customers may wish to return merchandise. These include a change of one’s mind (buyer’s remorse), quality of the merchandise, personal dissatisfaction, or a mistaken purchase of the wrong product. For clothing or other sized items, it may be a lack of a correct fit. Sometimes, there may be a product recall in which the manufacturer has requested (or been ordered) that the merchandise be brought back to the store. Also, gift receipts are offered sometimes when an item is purchased for another person, and the recipient can exchange this item for another item of comparable value, or for store credit, often on a gift card.

    How does a return merchandise authorization (RMA) work?

    A Return Merchandise Authorization (RMA) form is used when a customer wants to return merchandise. The form is filled out by the client and then sent to the seller, based on the seller’s return policy the client might get an RMA number, which means the seller is accepting the return of the merchandise.

    Return Merchandise Authorization - example

    What is an RMA number? Why is obtaining it important?

    A RMA number is assigned to the service order that is created when a customer requests repair, or service of product believed to be defective. The RMA number will be provided to the customer after successfully providing the information needed to create the service order.

    The issuance of an RMA is a key gatekeeping moment in the reverse logistics cycle, providing the vendor with a final opportunity to diagnose and correct the customer’s problem with the product (such as improper installation or configuration) before the customer permanently relinquishes ownership of the product to the manufacturer, commonly referred to as a return. As returns are costly for the vendor and inconvenient for the customer, any return that can be prevented benefits both parties.

    It also tells the merchant that a return is being made and offers protection against further returns and return fraud. The customer can use it to inquire about the progress of a return or other transaction errors.

    For example, if the customer hasn’t received any information about the return, the customer can contact the merchant and use the RMA number as a reference when speaking with support.

    Return Management

    Returned merchandise requires management after the return. The product has a second life cycle after the return.

    An important aspect of RMA management is learning from RMA trends to prevent further returns. Depending on what the rules are, the manufacturer may send the customer an advance replacement. RMAs may be minimized in a number of ways. Adding a customer survey capability may prevent RMAs by detecting problems in advance of returns.

    Returns are sometimes minimized by reducing transaction errors prior to the merchandise leaving the seller. Providing additional information to consumers also reduces returns.

    Return to Vendor

    Return to vendor (RTV) is the process where goods are returned to the original vendor instead of the distributor. In many cases the RTV was originally returned to the seller by the end consumer. While RTV transactions usually occur between the seller and the vendor, in some instances the end consumer returns the product directly to the vendor, sidestepping the distributor.

    Economic Impact

    In the US, an estimated 8–10% of in-store sales is returned whereas online sales may result in 25–40% returns. In Asia and Europe, less than 5 percent of purchases are returned. US shoppers returned $396 billion worth of purchases in 2018 – brick-and-mortar and online, according to the National Retail Federation (NRF). To fight high return rates in e-commerce, a realistic product visualization is needed. Next to imagery and video content, 3D technology like augmented reality and virtual reality, but also simply 3D in the browser can enhance the shopping experience and lower return rates.

    In the UK, Logistics costs for returns is estimated at between £20bn and £60bn per year. Figures show that 33% of retailers had to increase prices to counter rising returns volumes whilst 31% of retailers said managing returns impacts their profits. For some companies the costs of accepting returns amounts to as much as 5% of their annual turnover.

    Some Challenges with the RMA process

    • Fraudulent returns – In the United States, various abuses using the return process allegedly cost retailers more than $9 billion annually. One common practice is the use of the system in order to “borrow” the merchandise at no charge. The customer who engages in this practice purchases the item for temporary use, then returns it when finished. Examples include an article of clothing worn for a single occasion, or a book that is returned after it has been read. This practice is called “wardrobing.” Stores such as Macy’s and Ross put large “do not remove” tags on women’s dresses to try to defeat this, not accepting returns or exchanges for any items that do not have the tag. Many stores also refuse to refund certain items like reading materials, inflatable airbeds (Target and Walmart), and even portable heaters (Dollar General). Another problem is when customers legitimately purchase an item, then re-enter the store with the receipt, take an identical item off the shelf, and approach the customer service desk requesting a refund. In the process, they essentially receive the item for free, and may be charged with shoplifting or another similar crime if caught. Others have been reported to print fake receipts which they use to return stolen merchandise for a cash refund. However, this is nearly impossible now that most stores use individually numbered receipts. Scanning the receipt’s barcode at the cash register links legitimate returns to a database that validates the original purchase. (Despite this, some stores that have had such systems for years still refuse to accept a photocopy of a legitimate receipt where the original may have been misplaced, or obscured due to the store’s use of cheap thermal paper or very light ink.)
    • Denying returns – Some retailers have turned to a practice in which customers who return or exchange items excessively (beyond the guidelines set by a retailer) may be prevented from making a return or exchange with that particular company. An agency called The Retail Equation (formerly The Return Exchange) collects data from participating retailers via a swipe of a driver’s license, or most other types of government issued photo identification. The information found on the license is collected into a database, and other stores operated by that particular retail company can use this information to deny a return. This system can be used to prevent various problems, such as return fraud. These controversial practices of collecting information have been addressed by privacy rights advocates and spurred a movement for boycotting chains that collect consumers’ private information and allow third party sources to use it. The request of presenting a form of identification for returning products and collecting the information has stirred controversy, especially if the customer that purchased the product was a minor (under the age of 18). Immigrant rights groups have voiced serious concern over the practice since most illegal immigrants don’t have a state ID or a drivers license and this practice could potentially be used to discriminate against them, however, all of the stores that are associated with The Retail Equation, accepts all types of government issued photo identification, including, but not limited to, driver’s license (regardless of issuing state), state I.D.’s (regardless of issuing state), passports (regardless of issuing country), Mexican consular IDs (i.e. MCAS), concealed carry firearm permit (regardless of issuing state), and USA military I.D.’s.
    • Existing Legislations – Legislation exists in various parts of the world giving consumers the right to return goods in as-supplied condition for a full refund, within a set period of time, known as a cooling-off period (q.v.). Sometimes this legislation only applies to distance sales such as e-commerce.
    nax lette replied 10 months, 1 week ago 2 Members · 1 Reply
  • 1 Reply
  • nax lette

    April 28, 2023 at 8:19 am

    Thanks for sharing this information on the Return Merchandise Authorization (RMA) process. It’s interesting to learn how it works and its importance in managing returns. While the process seems straightforward, I can see how fraudulent returns could be a challenge for retailers. It’s surprising to see the high return rates in the US compared to Asia and Europe, and the economic impact of returns for retailers. It’s good to know that some companies are looking for ways to minimize returns and improve the shopping experience. Thanks again for sharing!


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