December 28, 2010

Amazon Patents Unique Return System

Amazon has patented a system that would allow people to identify bad gift givers and return their gifts before they even receive them.

The gifts, which are sent via warehouse miles and miles away are not only unwanted, but also a multi-million-dollar headache. They have to be repacked and shipped back to Amazon, then a new one has to be packed and shipped out again to replace it. The overall process is far from efficient.

Amazon is working out a solution that could perhaps revolutionize digital gift buying. The patent, which the company has been working on secretly, will allow a way for people to return gifts before they are even sent to them. The innovation would allow users to form an online list of bad gift-givers whose choices would be scrutinized before anything ships.

According to documents seen by the Washington Post, Amazon's patented innovation includes an option to convert all gifts from a lousy gift-giver to better choices.

"For example, the user may specify such a rule if the user believes that this potential sender has different tastes than the user." In other words, givers will have their presents inspected before anything is posted.

Amazon uses algorithms to help users create rules intended to fend off bad gift ideas at the pass. A "gift conversion rules wizard" would allow users to select the parameters of what counts as an acceptable present. Users could opt for "no clothes with wool" or ban singers such as Justin Beiber or Susan Boyle.

"Given how many people use Amazon," most lousy gift-givers would soon know about 'conversion'. "As for whether this would work, my opinion is no, other than to get Amazon on to a David Letterman list of top 10 signs that western civilization is dead," Don Davis, editor of Internet Retailer magazine, told The Guardian.

The proposal for the new innovation has raised the ire of the Miss Manners crowd, which thinks the scheme is a rather impolite gesture. After all, receiving an email notification of a forthcoming gift, and being able to check its price, is hardly the same as unwrapping the gift at home.

Anna Post great-great-granddaughter of the late etiquette author Emily Post and spokeswoman for the Emily Post Institute, told the Post that she hopes Amazon realizes it is risking major repercussions and abandons the idea. Because of the online retailer's dominance in the online shopping market, Post and others say they fear the idea could spread throughout the e-retailing industry, which brought in $28 billion in holiday gift purchases this year.

"This idea totally misses the spirit of gift giving," said Post. "The point of gift giving is to allow someone else to go through that action of buying something for us. Otherwise, giving a gift just becomes another one of the world's transactions."

Amazon's proposal, however, brings up a very costly part of the e-retailing business model: Up to 30 percent of purchases are returned, and the cost of getting rejected gifts back across the country and onto store shelves has online retailers scrambling for ways to reduce these expenses.

"It's in the millions of dollars, and it might even be billions," Carl Howe, a Yankee Group consumer technology analyst, told the Post. "If you can get the right gift to a person the first time, this could be a huge cost-saving invention. From a retailer's perspective, this is like gold."

Amazon's patent is 12 pages long, with numerous diagrams, including a "Gift Conversion Rules Wizard." The document makes for curious reading, reducing the art of gift giving to the dry language of patentry, according to the Post's Michael S. Rosenwald.

"It sometimes occurs that gifts purchased online do not meet the needs or tastes of the gift recipient," the patent says. "In some cases, concern that the gift recipient may not like a particular gift may cause the person sending the gift to be more cautious in gift selection. The person sending the gift may be less likely to take a chance on a gift that is unexpected but that the recipient might truly enjoy, opting instead for a gift that is somewhat more predictable but less likely to be converted to something else."

"The user may also be provided with the option of sending a thank you note for the original gift," according to the patent, "even though the original gift is converted." (Alternatively, a recipient could choose to let the giver know he has exchanged the item for something else.)

Amazon's patent represents the most extreme measures of finding ways to reduce shipping costs in e-retailing. Companies have taken steps on the front end, including wish lists and emailed gift cards.

"I don't think gift cards are the end of the world, but people should try harder first," wrote Rosenwald.

On the back side of things, retailers are trying to reduce shipping costs by using the less expensive US Postal Service for at least part of the return journey. USPS has partnered with its competitor, Fed Ex, on a program called SmartPost, which consolidates individual packages into larger shipments.

Kevin Brown, marketing director for Newgistics, a Texas company that specializes in simplifying returns for e-retailers, told the Post: "Anytime you have to touch a product, there's a cost associated with that, and those costs add up."

But it's not just shipping costs that e-retailers are struggling with. There are labor costs as well. Brown said each return typically results in about two phone calls to customer service lines. Also, returns require processing at distribution centers, which means extra staffing during the holiday season. And many opened gifts can't be returned to manufacturers and must be sold at a loss as refurbished.

"This is absolutely a huge business problem," said Howe. Shipping the right gift the first time seems like such a high priority. But although Amazon's idea might be exciting from a cost-savings standpoint, even they admit there are potential drawbacks.

"This would require a huge shift in consumer behavior, which is always hard to achieve," said Howe. "And there's really some risk of backlash here."

"Gift giving is not just about the loot. It's about the fact that someone thought to get you something, and took the time to do it. That's no small thing in this world," said Post, upholding her great-great-grandmother's legacy on etiquette and manners.

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