Source: nike.com/nike-by-you
Should customized products be return-friendly?
Nike and New Balance are among the few brands allowing consumers to return customized products. A new university study argues many more should be doing so.
Professors from Purdue University, University of Tennessee and Canada’s Queen’s University, in a Harvard Business Review column, said firms offering customized products report a 40 percent decrease in their returns because customers interacting with customization engines are more likely to find a product that matches their desires. The co-creation process also builds an “attachment” to the product to reduce return likelihood while elevating demand for the item and brand loyalty.
“Firms with lenient returns policies for customized products could under certain circumstances benefit both from expanded sales (because of the leniency) and from overall lower returns (because of the lower perceived risk to the customer of customizing) — a win-win outcome,” the authors wrote.
Firms were encouraged to consider reducing or eliminating customization fees to gain the benefits, noting Nike’s and Apple’s free customization options.
Acknowledging that customized items cost more and are harder to resell versus standard products, the study said the downside risks can be reduced by using robotics and 3D printing to lower the cost of customization. Making the customization interface more user-friendly could further reduce a return likelihood. Finally, AI-driven solutions could help salvage the returned items for resale by finding consumers whose color preferences and even initials match those of the customized products.
The study comes as mass customization has become fairly widespread across categories, from Levi’s jeans to Yeti coolers, Gucci handbags and William’s & Sonoma monogrammed towels. Generous or free return policies are fairly pervasive across retail for standard products because they remove a primary barrier to making a purchase.
Retail returns jumped to an average of 16.6 percent in 2021 versus 10.6 percent in 2020, according to a survey from the National Retail Federation and Appriss Retail. The increase was attributed to and higher growth online. The average rate of returns for online purchases was 20.8 percent — an increase from 18.1 percent the prior year.
- Why You Should Allow Returns on Customized Products – Harvard Business Review
- Customization and Returns – SSRN
- Retail Returns Increased to $761 Billion in 2021 as a Result of Overall Sales Growth – National Retail Federation
- A more than $761 billion dilemma: Retailers’ returns jump as online sales grow – CNBC
- Study: Customization becoming more commonplace – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Do you see a larger upside or downside in offering lenient return policies for customized products? Do you agree that incentivizing the purchase of customized items could help reduce the overall returns burden for retailers?
Poll
Loading …BrainTrust
Ken Morris
Managing Partner Cambridge Retail Advisors
Brian Delp
CEO, New Sega Home
If the provider can establish a consistently good record for delivering the right customized product, the rule can be more stringent. A returned customized product is usually not resealable and the retailer has to absorb the loss.
I am sure customized items have lower return rates, if only because people have put more consideration and effort into buying them and in ensuring they are tailored to their personal tastes. As for returns, this really depends on the economics. Customized items are more difficult to resell – not just from a demand perspective but in that they require specific entries in inventory systems, etc. They also have greater costs attached to them in terms of production. So I can understand why some retailers would be reluctant to allow free returns.
Allowing for customization and co-creation is the way of the future, especially in the context of how the metaverse works. Consumers want to play a part in product development, and I could actually see reselling become less of an issue over time as shoppers get excited about the idea that the item they’re buying is one of one.
Customization, personalization, collaboration and co-creation with the customer is absolutely the future of product creation.
Depending on the extent of customization, returns should be allowed. Reselling one-of-a-kind products could be another way to attract new customers who want curation without the pressures of taking part in the design.
Who besides Apple and Nike could afford to do this? How many would customize something like the outrageous Starbucks drink orders to laugh at it and return? You can’t separate making a profit on customized products from it as “just another cost of doing business.”
You know by my comments that I support easy and free customer exchanges.
However customization is a whole different situation, assuming the product is not defective. What is the customer returning? Something that the manufacturer must dispose of. I only see two option. No returns of customized product or a heavy charge for sending it back that cover the real cost of the disposal of the product. The most lenient position I see is that the customer pays for the shipping on returns.
Before the customer touches “buy,” there should be a large and obvious warning that says “final sale.”
As the world migrates to a more customized and personalized shopping experience, there will be added complexity to the reverse logistics experience. The critical component of personalized and customized products is that the brand and retailer execute right according to the customer’s specifications. Customers should never be penalized for wanting to return a product, even if it’s personalized. Personalization at scale is never easy. However personalized experiences need to be executed with the customer journey as a top priority.
Personalized products are gaining momentum and are a clear profit and revenue growth opportunity for retailers and brands. However this key competitive differentiator should not become a friction-filled experience if the customer is unhappy with the product and wants to return it. There are now mechanisms and strategies retailers and brands could leverage to recycle the materials or resell the products in another marketplace.
I just don’t know if most regular retailers can afford to do this. Customized product has a personal interest that comes with it and I just don’t think someone else is going to really like what I customized.
Who am I going to sell them to, my doppelgänger? I think if you want custom product you need to pay up front. Nike and New Balance may be able to absorb the cost but at what price to the consumer? I believe we need to get a handle on returns, and easing online returns policies like this just exacerbates the problem. As I’ve mentioned before, embedding RFID tech into products can help reduce bogus returns. That covers some of the problem, but what about resale potential? Come to think of it, if some guy named Ken returns a pair of his $5,000 customized sneakers and I can get them for only $2,999, well…
By the way, why does Apple offer free engraving on that iPhone? Because then it totally kills its resale or trade-in value.
Customization is one level, but personalization is a whole other level. No one wants to search through a bin of rejected beach towels like a gas station keychain rack to find one with their same name embroidered on it. As long as the brand has an outlet to sell customized, not personalized products it would be a great strategy and allow them to stand out as customer-centric. Any chance to reduce friction is ideal, however there is a point of diminishing returns and personalization is likely that line.
Given our industry-wide push to environmental sustainability and reducing what goes into landfills, I see challenges to allowing lenient return policies for customized goods. Instead of enabling easier returns for customized products, why not make it easier for customer to see the product in person before purchasing? And with advances in virtual tech tools, it’s possible to give customers a clear idea of what the products will look like in the context of its actual use. Retail has always had “final sale/no return” policies for products that can’t be resold and customers have understood when informed up front. Instead of a lenient return policy, why not create a secondary marketplace where customers can offer their original creations up for sale in lieu of offering a refund?
We must NOT get ourselves in the business of offering premium products (like customized ones) at a discount. That’s bad business and will eventually put Uber under just as it has every other company who has tried it.
A customized product is a premium product. Consumers are well trained to expect that they are paid for in advance and rarely returnable (except for defects). Retailers need to stick to their guns on this one and avoid the slippery slope of “if we never seek profit we’ll make more profit” ethos that seems to dominate headlines these days.
If you don’t want to handle returns of items that can’t be resold don’t offer customized products. It’s really that simple.
It all depends how you measure the upside of customized items. They give you intel into customer preferences, can inspire design for core product lines, and if they are returned, capturing the reasons why can provide valuable data and customer insights.
But one of the key things in driving down returns is better product information. This applies doubly for custom products. Brands need to develop new tools (naming conventions or standardized product attribute descriptions) that let customers understand the way the product will look and feel before they buy.
…customers interacting with customization engines are more likely to find a product that matches their desires… Really?
I won’t comment further on the study — I didn’t read it so I’ll scold myself for thinking it’s as inane as it appears — but I’m skeptical of studies that focus all their energies on revenue, and (still) treat cost as an afterthought — if at all.
I think returns must be allowed for customized items. However, if you purchase customized items, there should be a “restocking” fee that should cover the bulk of the actual cost. That way, the manufacturer can still resell the items, and not get hit with a loss.
There are definitely ways to accommodate this. There will also be cases where something was done incorrectly. In these cases, there should be a smaller “restocking fee” with the option to allow the manufacturer to fix the issue and resend the item.
Speaking of Apple’s and Nike’s way of providing lenient returns for customized products, retailers should not blindly follow it. Both Nike and Apple are confident that their customized products are correct for their customers and won’t be easily returned. Lenient returns, therefore, suit them. But if other brands want a lenient return strategy to be successful, they would first need to ensure that their products are Nike-level customized. Or else it won’t be much of a viable option.
Moreover, getting a customized product shipped against extra dollars only to return it after unboxing is a frustrating experience. Retailers, therefore, need to focus on improving their products rather than prioritizing returns. An improved product experience will automatically reduce returns.