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Sat 7 Nov 2009 04:00 AM

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Damaged goods

Managing the return of faulty products is an issue that often leaves the channel divided — nowhere more so than in the Middle East, as vendors and partners jostle to define their roles in a process that is too important to be ignored.

Damaged goods
Ali Baghdadi, Aptec.
Damaged goods
JP Nambiar, Jumbo Electronics.
Damaged goods
Christian Assaf, Seagate.
Damaged goods
Khwaja Saifuddin, Western Digital.

Managing the return of faulty products is an issue that often leaves the channel divided — nowhere more so than in the Middle East, as vendors and partners jostle to define their roles in a process that is too important to be ignored.

The role of Return Merchandise Authorisation (RMA) in after-sales service has always been troubled. Its very reason for existence — the acknowledgement that occasionally a customer has a problem with a product — is difficult for vendors to explain in a positive light.

For resellers caught at the customer interface and expected to react quickly to faulty kit, the process of realising a refund or a credit is often extended until so long after they have provided a replacement product, that returns are a constant drain on their squeezed margins.

Whatever strategy they adopt, vendors will always be damned in somebody’s eyes. If they take post-sales support in house, they are very publicly accountable when the standard of any replacement policy falls short. If they appoint certain resellers as authorised service partners, non-authorised resellers find themselves directing customers with faulty products to a competitor, adding insult to injury.

That was Nokia’s policy in the Middles East until this summer, when it announced that it was outsourcing after-sales servicing to two partners (Al Futtaim’s Technoserve division and Axiom’s Phone Care division), taking a tighter grip on post-sales service standards and brand protection.

Existing authorised service partners might feel aggrieved but for everybody else, and particularly customers, the clarity of the strategy and Nokia’s robust move towards greater accountability promises to cast RMA in a less problematic light.

Outsourcing may increasingly be seen as the preferred option. Middle East distributors, understandably, would rather focus on their core business than carry the financial and logistical can for managing returns.

In Europe, a recent survey by maintenance specialist Comtek revealed just how seriously many of them are taking the RMA drain on their resources. More than 60% of distributors said they would terminate a vendor contract if returns were handled badly — although how many would carry out such a threat in these turbulent times is open to conjecture.

More than 80% complained of having to carry extra stock to compensate for a lack of local vendor repair facilities, and a similar percentage would rather vendors without in-country RMA facilities outsourced this function to a suitably qualified third party. The survey also revealed that the average turnaround for RMA and repair services can be as long as two months — a further indication of its status as a thorn in the side for the retailer or reseller charged with resolving the customer’s problem.“RMAs are always a headache for anyone, because when somebody is coming back to you with a faulty product they are angry or upset, especially if it is under warranty or it is relatively new,” admitted Ali Baghdadi, CEO and president of Middle East IT distribution house Aptec.

“And most of the failures happen within the first 20 days of purchase, so of course there is the hassle of managing that. Somebody might demand their money back or an instant replacement. Can you imagine if they have a device that fails the day after they bought it, and then the vendor tells them, ‘send it back and we will call you in a month’?”

Baghdadi says proper and swift management of RMA is vital — but that it always constitutes an opportunity for improvement, something that JP Nambiar, head of retail at Jumbo Electronics entirely agrees with.

“Here, any RMA requests need to be handled by the respective product manager together with an inbound executive, as it needs formal vendor approval before acceptance,” said Nambiar.

“This can take up a lot of time if you don’t have the right processes in place. Can you make money from RMA? Quite the opposite! You can’t make any money from RMA as a distributor. You are actually out of pocket until the returns process is completed, which can take time, while the customer gets their product replaced or a refund straight away.”

Nambiar is critical of vendors who have long, drawn out processes that require endless follow-up with authorised service providers — something Nokia, for example, appears to have heeded — proof of sales and purchase, and formal approval from the local call centre.

“These processes could easily be streamlined by having trained staff capable of quick diagnosis and approval of RMA providing customer service,” he said. “A simple change in operations would improve efficiency tremendously while improving overall customer satisfaction. We have watched these mistakes being made and learned from them, and we have carefully engineered our own processes to avoid them.”

Aptec has also been through this learning process, to the extent that Baghdadi confirms the distributor is setting up a specialist enterprise to operate as a third party logistics services provider.

“To be honest, I wouldn’t be very familiar with the exact [vendor] policies in our region but my team tells me there is a very good opportunity for us to at least manage the reverse logistics and RMA for some of the IT and electronics vendors,” he said.Some vendor strategies do have decent RMA approval ratings from their distributors, however. Hewlett-Packard’s policies earn high praise from Jumbo Electronics, for example, as the vendor looks set to follow Nokia in re-evaluating its approach to RMA. “The good part about HP’s RMA process is that strict timelines have been clearly defined for the process managers, along with clear document flow matrices,” explained Jumbo’s Nambiar.

“This speeds up the overall process, which allows a quick decision for the affected customer. HP is also looking to empower the customer support managers at major retail outlets themselves to decide and accept RMA on site. While the formal terms and conditions are yet to be worked out, once implemented, the new processes will speed things up and help the reseller address the end consumer’s woes quickly and effectively.”

He blames other vendors for not doing enough to educate customers, so that no matter how much they have invested in RMA and warranty services, their strategies don’t deliver the benefits they should. One major issue is a confusion over definition.

“A common misunderstanding is the meaning of ‘warranty’ and the meaning of ‘guarantee’,” he said. “This means customer expectations are not managed effectively. On the other hand, distributors themselves need to be aware of the process timelines to avoid unintended losses.”

Many vendors, of course, claim that their RMA strategies are sophisticated and evolved enough across the region to meet the expectations of their customers and their resellers.

Storage specialist Western Digital opened its first collection centre in Dubai almost a decade ago, and also has dedicated collection centres in Istanbul, Riyadh and Cairo.

“Our collection centre processes RMA disk drives at one central location, to enhance post-sales services to Western Digital’s local customers in the region,” said Khwaja Saifuddin, director sales MEA.

“Our authorised partners can now process returned drives much more quickly and in a more economical way which benefits both them and their customers. The establishment of our four collection centres in the region highlights our enhanced investments and greater focus on sales, marketing and support initiatives to maintain the company’s strategy for MEA as a major growth market.”

Saifuddin says that having a local RMA facility for each market in the region shows the importance and commitment that a vendor has for that market. “We value our strong local market presence and continue to build relationships with our vendors and end-users by providing them with products and services that are necessary to them,” he added.Seagate also has a number of local collection points in the Middle East — Dubai, Cairo and Riyadh. Channel manager Christian Assaf says that having a direct RMA setup gives the channel more security.

“Sure, having RMA facilities in each country is the optimum solution, but there are many factors that justify having such facilities,” he explains. “Total Available Market (TAM) is the most critical for such an operation, as it makes no sense having a collection point in countries where the TAM doesn’t justify the ROI.”

Saifuddin and Assaf say their organisations work closely with their distributors to minimise the burden of the RMA process, ensuring that local replacement stock is available and that a product can be exchanged as soon as a claim is authorised and an RMA number issued. Both agree that a quick turnaround time is essential for effective RMA, but they have different views on the ideal role of distributors in the process. “The best system is what works,” said Saifuddin. “There is no ideal way but yes, from our experience, when RMA is carried out via a distributor, it works best.”

“Vendors who have many distributors cannot differentiate between them and it wouldn’t be feasible to give this advantage or role [to one] and exclude others,” countered Assaf.

“Third party logistics and repair specialists are a better choice, although it is more expensive. In some countries, distributors play a major role in the RMA process where you cannot as a vendor send an exchanged drive to the end-user. In such circumstances, the drive is delivered to the end-user via the local distributor.”

They also differ on whether the channel can actually make money from RMA. Saifuddin suggests that ideally, it should not be considered as a revenue generator. But Assaf says it’s important to look at the wider picture.

“Every cent you can help your channel save is a great thing,” he said. “Despite the fact that Seagate has the lowest defect rate, helping the channel claim RMAs without any charges involved is a benefit and a profit.”

With such disparate views on both sides of the vendor/distributor relationship, it looks as if RMA will continue to occupy an awkward place in the dynamic. It’s encouraging that many vendors are fine-tuning their strategies to address the specific requirements of local markets in the region. But the challenge for distributors and resellers will always be to turn RMA into a measurable revenue opportunity rather than an action uniquely associated with a poor customer experience.

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