Luncheon Keynote

Dennis NicoskiA/Senior Vice President, Sales and Customer RelationsU.S. Postal Service

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Exploring the NextGeneration of Consumer Returns

Dennis NicoskiSenior Vice President, Sales & Customer RelationsUnited States Postal Service

Return to the FutureArlington, VASeptember 20, 2018

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EXPLORING THE NEXTGENERATION OF CONSUMER RETURNS

RETURNS ARE A NECESSITY

CONSUMER EXPERIENCE PAST, PRESENT, & FUTURE

POSTALVISION 2020/RLA: RETURN TO THE FUTURE

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EXPLORING THE NEXTGENERATION OF CONSUMER RETURNS

RETURNS ARE A NECESSITY

CONSUMER EXPERIENCE PAST, PRESENT, & FUTURE

POSTALVISION 2020: RETURN TO THE FUTURE

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E-commerce growth has exploded over the past few years and is poised for continued growth.E-commerce is growing

1. Retail E-Commerce Sales Report. U.S. Census Bureau. 2018. US Retail Ecommerce Sales, 2014-2020. eMarketer. May 2016. 2. “2017 Retail Trends.” Strategy& PwC. 2017. 3. “State of the U.S. Online Retail Economy.” comScore. 2018. 4. “The State of Shipping in Commerce.” Temando. 2017.

Online sales growth dwarfs that of the retail industry as a whole, with growth rates 7x that of total retail.2

7x

$1B+ days are the new norm – Cyber Monday was the highest spending day ever, exceeding $3B for the first time.3

$1B+

of retailers ship between 21 and 100 online deliveriesper week. 4% ship 10K+ deliveries per week.4

48%

$684B

$600B

$525B

$448B

$388B$339B

$297B$260B

$229B$199B

$169B

2020*2019*2018*20172016201520142013201220112010

U.S. Retail E-Commerce Sales2010 – 20201

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45%

72%

54%

41%

Canada

UK

Mexico

Top Countries for Cross-Border Selling (from U.S.)

$1T

of global shoppers look for U.S. goods online.1 in expected cross-border B2C e-commerce sales in 2020.2

40%

44%

46%

Items that are hard to find locally

Secure way to pay

Free shipping

Top Drivers for Cross-Border Selling (Globally)

Canada and UK are top destinations for US-based e-commerce sales. Western Europe and eastern Asia are other popular destinations.3

Improvements to visibility and cost barriers are inevitable and will drive cross-border selling.3

Consumers are increasingly shopping beyond their borders, and the U.S. has become a prime destination for global online shoppers.1

Cross-border demand

1. PayPal Cross-Border Research 2014. National Retailer Federation Retail Big Show 2016. 2. Accenture & AliResearch 2015 National Retailer Federation, Retail Big Show 2016. 3. PayPal Cross-Border Merchant Research 2016 USA Report PayPal.

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Returns have become a necessity, fueled by the growth of e-commerce, and volume will only continue to grow as online shopping lacks the “touch and feel” experience.

Returns are the new normal

1. “Riding the Returns Wave: Reverse Logistics and the U.S. Postal Service.” USPS OIG. April 2018. 3. “2017 Retail Trends.” Strategy& PwC. 2017.

Americans returned over $100B in e-commerce purchases in 2017.1

Shoppers return online apparel purchases 8x more frequently than in-store purchases.3

USPS handled 148M package returns in FY16.

In 2017, between $113B and $132B of e-commerce purchases were returned.

148M

$100B+

return rate for onlinepurchases

25% 3%

vs.

return rate for in-store purchases

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A number of different industries must optimize their returns processes to ensure success. Returns touches everything

HOME TRY-ONWarby Parker, Stitch Fix

END OF PRODUCT LIFEApple, Dell Computers

RENTAL RETURNLe Tote, Rent the Runway

TRADE-INAsurion, Tekovery

DIAGNOSTIC TESTINGEverlyWell, 23andMe

DEFECTIVE PRODUCTSRecall Results, Stericycle

RECYCLINGAlcoa, Clover

RETURNS

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Businesses want to meet the needs of their customers, but they also need affordable, flexible options.1

Our business customers are looking for a better experience

1. USPS Small Business Customer Survey – Returns Experience. March 2018.

of small businesses say their business pays for their

customer’s returns.

70%

of small businesses receive returns requests on a regular

basis (daily, weekly, or monthly).

55%

“

”

“I want to be able to track my return every step of the way. I want to know where

it is every time I need to track it.”

- USPS Small Business Customer

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EXPLORING THE NEXTGENERATION OF CONSUMER RETURNS

RETURNS ARE A NECESSITY

CONSUMER EXPERIENCE PAST, PRESENT, & FUTURE

POSTALVISION 2020: RETURN TO THE FUTURE

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The typical customer was expected to overcome lots of tiny inconveniences to satisfy an extra business expense.Returns of the past

Same channel as purchase

Provide physical receipt

Unopened package

Extra paperwork

One week from purchase

Forced to justify return

Customer pays restocking fees

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Returns of the past

$162MDefective / poor quality

$99MBought

wrong item

1. IHL Group/Order Dynamics “Hefty Returns” WWD. July 2015. Amount of merchandise returned.

Return Reasons Across the World1

$89MBuyers

remorse

$83MFound better

price elsewhere

$64MGift returns

Yet the business may have been the cause of the return in the first place.

Same channel as purchase

Provide physical receipt

Unopened package

Extra paperwork

One week from purchase

Forced to justify return

Customer pays restocking fees

The typical customer was expected to overcome lots of tiny inconveniences to satisfy an extra business expense.

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Every step created friction that risked losing the customer. 1

Returns of the present

1. Making Returns a Competitive Advantage. Navar. June 2017.

Same channel as purchase

Provide physical receipt

Unopened package

Extra paperwork

One week from purchase

Forced to justify return

Customer pays restocking fees

say restocking fees prevent them from

making purchase

will not make purchase if they cannot return to

store

say “no questions

asked” policy make them more

likely to buy

who returned an item were

repeat shoppersof the retailer

are satisfied with returns if the “process was really easy”

keep unwanted items to avoid the hassle of

returning them

said a 30-day return policy is

fair

22% 53% 82% 53% 62% 72% 84%

Same channel as purchase

Provide physical receipt

Unopened package

Extra paperwork

One week from purchase

Forced to justify return

Customer pays restocking fees

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Now the customer has an easier experience with a variety of new returns options meant to keep her businesses.Returns of the present

Returns has become a competitive differentiator that businesses must use to attract and retain customers.

Return online or in store

Trial use before returning

No receipts required

Business takes on returns cost

Immediate refund

Transparent status updates

Generous return times

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While the industry looks to the future, some businesses are stuck on present challenges.Yet returns can still be a challenge for businesses

1. Turn your reverse supply chain into a profit center. Supply Chain Quarterly. Q1 2012. 2. Reverse logistics still a puzzle for omnichannel retailers. DC Velocity. Nov 2017. 3. Recognizing Return Fraud. National Retail Federation. March 2018.*Respondents were allowed to select multiple responses. 4. Multichannel Fulfillment and Returns Survey. MetaPack. Q3 2014.

Pinched business budgetsRising transportation costs are making

businesses more price sensitive.

Complicated logisticsBusinesses invest in a complicated processing

system and then have to do it in reverse.

Drivers wantedA trucker shortage has caused freight rates to increase 28% over SPLY.

Returns are expensiveIt can cost 2-3x more to return a product than deliver the original package.1

Do-it-yourself approach64% handle some returns in-house while only 40% contract to a 3PL.2*

Inventory management struggleOnly 42% of businesses believe that they handle their returns process and technology well or extremely well.4

Guessing game27% guess or cannot measure the financial impact of returns.2

Fear of foul playFraud by bad actors is a legitimate concern. Some estimates put domestic return fraud at +$9B a year.3

Uncertain financial impactSome businesses struggle to understand how

returns impacts their bottom line.

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EXPLORING THE NEXTGENERATION OF CONSUMER RETURNS

RETURNS ARE A NECESSITY

CONSUMER EXPERIENCE PAST, PRESENT, & FUTURE

POSTALVISION 2020/RLA: RETURN TO THE FUTURE

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The returns ecosystem is evolving to address the increasing demand for a seamless experience.Returns of the future

• Label innovations

• Rapid refunds

• Dynamic routing

• International platforms

• Returns concierge

• Parcel lockers

• In-store returns

• Augmented reality

• Blockchain

• Artificial intelligence

DISRUPTIVE TECHNOLOGYINCREASING EFFICIENCY ALTERNATIVE CHANNELS

USPS is actively working to partner with those revolutionizing the customer experience in the Returns market.

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INCREASING EFFICIENCY

Labels are an extra cost on retailers and consumers do not want the hassle of printing or attaching a return label.

Label innovations

Providing return labels costs $0.25-$0.40 cents per

package, whether a return is initiated or not.1

Eliminating the need for a label to return an item.

1. The Essential Guide to Retail Returns. Navar. June 2017.

Outcomes

Retailers save on label costs and can expedite reverse logistics

Customers have a more seamless returns experience

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Give the customer some credit

In a recent poll of 100 leaders in online retail, 77% said speed of credit is the

most important return issue for their customer.1

Offering customers refunds before the merchant receives the return.

Consumers want faster refunds. Retailers want these customers to buy other products with their credit.

1. Turn your returns into returning customers. newgistics. October 2017.

Outcomes

Consumers no longer wait for refunds on returns

Quick credit/refunds incentivizes repurchase from the same brand

Quick credit/refunds incentivized repurchase from the same brandHarvest valuable returns data that grows revenue and reduces fraud

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Dynamic routing

44% of U.S.-based online retailers said a rising rate of

returns has negatively affected margins.1

Flexible routing and triage that optimizes the destination of a return.

Businesses do not want to pay the costs of processing a return through their entire supply chain only to send it again to a reseller/recycler.

1. The Cost of Returns. eMarketer. March 2018.

Outcomes

Returns can be verified, redirected, and repurposed more quickly

Transportation and labor costs can be reduced on returns

Quick credit/refunds incentivized repurchase from the same brandGoods are routed to where customer demand is highest

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International returns platforms

45% of global retail supply chain professionals cite cross-border logistics as their primary challenge.1

Offering platforms and technology solutions to process returns across the globe.

The e-commerce market is global and international returns present unique challenges to businesses.

1. Challenges that Retail Supply Chain Professionals Face. eMarketer. February 2018.

Outcomes

Offering returns is no longer a barrier to entry into foreign markets

Consumers can shop with more confidence and options

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ALTERNATIVE CHANNELS

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Returns concierge

71% of consumers said a positive returns experience greatly encourages them to

shop at a store again.1

Providing a service where customers can drop returns without much preparation.

Preparing and shipping returns inconveniences customers and is expensive for businesses.

1. The 4 Trickiest E-Commerce Returns Challenges – And How to Solve Them. Sidecar Discover. 2018.

Outcomes

Spares customers from the “arts and crafts” nature of prepping return

Retailers can ship returns in bulk and save through consolidation

Returns can be repurposed or recycled for restocking

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Parcel lockers

Although 68% of online returners have shipped

items back to the retailer, 60% prefer to return items

to a physical store when given a choice.1

Conveniently located spaces for customers to securely drop returns.

Customers want more flexibility to choose where they return an item.

1. The Amazon Effect on Reverse Logistics. DRS Product Returns. January 2018.

Outcomes

Customers are able to return items at convenient locations

Provides an additional (and potentially cheaper) return option

Businesses can partner to use physical space more efficiently

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In-store returns

Nearly 1/3 of customers say they like returning an item in-store because they can

then shop for other items.1

Offering and incentivizing quick and easy returns at the brick-and-mortar location.

Customers want the in-person assurance their return is accepted and the chance to search for a replacement item.

1. Making Returns a Competitive Advantage. Navar. June 2017.

Outcomes

Saves customers time and money on returns

Retailers reduce returns costs

Drives additional in-store foot-traffic that can lead to new sales

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DISRUPTIVE TECHNOLOGY

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Augmented reality & artificial intelligence

Some retailers have increased net revenue 5%

by using AI to improve online fit accuracy and

reduce returns.1

Simulating the in-store, physical shopping experience for customers.

Consumers have imperfect information when shopping online. Retailers want their customers to keep the items they purchase.

1. True Fit. 2018.

Outcomes

Customers can evaluate items with increased accuracy

Retailers can offer a differentiated e-commerce shopping experience

The likelihood of returns can be reduced

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Blockchain

Returns fraud costs retailers roughly $15B to $22B globally each year.1

A decentralized ledger that uses peer-to-peer consensus to verify and authenticate all information recorded within the ledger.

Retailers want visibility into their returns process to limit fraud and mistakes.

1. Reverse Logistics Magazine. Edition 94.

Outcomes

Traceability, data visibility and reconciliation are improved

Credit processing is faster and fraud is reduced

Products are authenticated and a virtual warranty is established

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Exceeding customer expectations is critical to our collective successWe put our strengths to work for you.

Enduring partnerships and expertise

Convenience of our nationwide access

Established and evolving delivery infrastructure

Secure technology infrastructure

Emphasis on sustainability

Innovative and customized solutions

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THANK YOU