Why a Good Return Policy Is So Important for Retailers

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For obvious reasons, most stores focus on practicing good customer service specifically to enhance sales. But customer service doesn’t end once a purchase is made. Or at least it shouldn’t. The return—that moment when the customer effectively tells the store that the sales transaction was a failure, that they found something better, or a better price—is a test for retailers. And according to my research, it’s a test that retailers often fail. When that happens, shoppers feel tricked, and business suffers.

As a consumer psychologist, professor, and retail consultant, I often interview consumers about their shopping experiences. Sometimes the interview occurs in a formal setting; other times, it’s just a casual conversation in the mall. I always promise to keep last names private, with the hopes of getting the most honest answers possible. Over the years, what they’ve told me again and again is that they feel the retailer-customer relationship is just that—a genuine, personal relationship—and that a violation of trust via a bad return experience can ruin this relationship forever.

For example, Rae, a single woman of mixed race woman in her mid-30s, once had to make an emergency purchase at an Apple store in Canada when she forgot the connector that would allow her to play a business presentation. Turns out she didn’t need the connector after all, and wound up trying to return the unopened item at an Apple store in the U.S. “They wouldn’t take it back because I bought it in Canada. That’s just crazy. Aren’t they supposed to be a modern, international brand? Liars.” Rae, who says she has “just about everything Apple makes,” lost her devotion over a measly $35 purchase that Apple refused to allow her to return. “It’s not the money,” she says, “it’s the bull****.”

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Many stores have tough return policies. The big problem here is that, in this instance, Apple’s reputation as a worldly brand with outstanding customer service didn’t match the customer’s experience. Apple fell well short of what the customer expected, and the customer felt burned.

Similarly, when Janine, an African-American woman in her 50s, goes to the mall these days, she walks right by a once-favorite store, Williams Sonoma. Why? She wasn’t able to return a gift without a gift receipt. Janine shops at lots of other stores that won’t take returns without receipts, but Williams Sonoma is the only one that gets her cold shoulder. That’s because for years Janine says she had “paid top dollar at Williams Sonoma,” and she’d expected that due to her loyalty as a customer, as well as the amount of money charged by the store, the retailer would have a more flexible return policy. “They put on this air of graciousness,” Janine says, “but they’re acting like a discount store. The sales clerk looked kind of smug about the new policy too—like I was cheap or dishonest or something.”

The tone struck by Rae and Janine isn’t mere annoyance. It suggests deep betrayal. Janine’s longstanding relationship with Williams Sonoma was severed by what she perceived to be a breach of promise, and a sales clerk with bad manners delivering the blow made it all seem very personal. If her sense of fairness hadn’t been violated, she would have happily continued to shop at the store.

If retailers are losing customers over restrictive return policies, why are they putting these policies into practice? The answer is that returns are costly, and stores try to control costs by restricting returns. Returns are also on the rise—up 19% from 2007. For every $1 spent on merchandise today, 9¢ is returned.

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What retailers are discovering is that they must walk a fine line. A simple and easy return policy boosts sales, as shoppers are more willing to make purchases with the knowledge that returning them won’t be a hassle. On the other hand, if too many returns are made, it causes havoc to the retailer’s bottom line. There’s a dance going on because authenticity, transparency and “living up to promises” are important values to consumers. Retailers use imagery, emotion, and symbolism to craft an enticing image—which becomes the personality of the store. That image is an unspoken promise of a particular type of shopping experience. It’s the retailer’s job to ensure that every consumer touchpoint lives up to the promise of a store’s image, including returns.

Several online retailers have found that it’s wise to be especially accommodating with returns. Shoe and clothing e-seller Zappos offers free shipping on deliveries and returns, as well as a return policy that’s as hassle-free as they come. They’ve built a wildly popular business, in part, on the philosophy that frequent returners are also frequent buyers.

Most retailers aren’t as accommodating, and feel like they must not only manage the financial impact of rising returns, but cope with mushrooming incidents of fraudulent returns as well. Last year, retailers reportedly lost $14.4 billion (up from $9.4 billion in 2009) to fraudulent returns such as wardrobing, in which people buy products like big screen televisions or party dresses to use for an event, and then return them. One couple in their late 40s proudly told me that they found a way to “rent” boogie boards for free when they visited Hawaii recently. “We bought two at Costco and then returned them before we went home,” the woman said. Another woman explained how she took advantage of Nordstrom’s returns system. She bought three bras from the retailer, but then lost weight after she’d worn them for a while. “So I took them back and exchanged them for my new size.”

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We all pay the price for such consumer behavior, as stores take new measures to protect themselves. Some have begun to track shopper returns in order to restrict serial returners — or “returnaholics,” as they’ve been called. Others have shortened the time permitted to make returns or have ramped up requirements for receipts and I.D. Many electronics retailers charge a “restocking fee” for returns. And some stores hang conspicuous tags on clothing or stickers on electronics to prevent wardrobing. These new procedures and policies can feel confusing, even maddening, to shoppers.

While stores are doing what they can to protect themselves, shoppers must do so as well. Making an impulsive purchase with the thought that “I can always return it, no problem,” was probably never a good idea, and what with the rise of tougher return policies, it’s an even worse approach nowadays. Besides being more careful with what you buy in the first place, here are a few simple tips shoppers can take to minimize the agony of store returns:

1. Always check the retailer’s return policy. This is especially important when shopping online. In particular, discount retailers often don’t take returns or will offer a merchandise credit, but not a refund.

2. Keep tabs on receipts. Attach your receipt to your purchase and don’t remove tags until you’re sure you’re going to keep it. Store all your receipts in the same place in case the product is defective. If you lose your receipt, you can sometimes locate a record of your transaction online. Retailers have found that over 14% of returns without receipts are fraudulent and are therefore increasingly requiring receipts for returns.

3. Be prepared before bringing in a return. Preparation lessens the likelihood of conflict and speeds up the return process. Bring your receipt and I.D., and treat the merchandise you’re returning with respect. Says Bridgette, who works at Bloomingdales, “It’s disappointing to send someone off with their purchase nicely pressed and on a hanger, and then to have it returned in rumpled ball.”

4. Hold the emotion. Though you’re sure to occasionally encounter disrespectful salespeople (especially at commission-based stores), it won’t help to get angry or emotional. You also don’t have to be apologetic. Unless you’re a serial returner or have worn or damaged the merchandise, it’s your right to return it.

5. Don’t delay. Because of mounting returns, many retailers have shortened the time period after a purchase that they’re willing to accept a return. Often, the window is just 20 or 30 days.

Kit Yarrow chairs the Psychology Department of Golden Gate University and was named as the university’s 2012 Outstanding Scholar for her research in consumer behavior. She is co-author of Gen BuY and is a frequent speaker on topics related to consumer psychology and Generation Y.