Photo: @daphneemarie via Twenty20
What if unwanted online purchases didn’t have to be returned?
If a returned item is going to be thrown out anyway, why not refund the customer and let them keep it?
That’s the premise behind Returnly’s Green Returns, whereby the customer is refunded without being required to return the original item.
At this point, such “returnless refunds” are aimed at “beauty and intimates retailers that are often required to dispose of used and opened products that pose a potential health risk.”
The service is called Green Returns because it eliminates the eco-cost from extra packaging and delivery. Concerns have heightened over the environmental impact of online selling and returns overall. Returnly cited findings by Optoro that five billion pounds of returns end up in landfills every year.
In addition to the potential green benefits, consumers get other perks:
- No return hassles: Not having to box up and mail any online return.
- Quicker refunds: As part of Returnly’s standard offering, consumers earn immediate store credit at the place they bought the product. Consumers receive quick cash refunds as well versus waiting for the returned item to be fully processed. For credit cards, typically a few days are required for the “returnless” refund to be credited back.
- Free re-gifting: Consumers can give the item to a friend or family member to enjoy instead.
Retailers avoid the cost and effort spent with a return, may see a sales benefit from offering immediate store credit, and earn goodwill from the eco-friendly step and consumer perks.
The service is possible because Returnly’s core offering enables retailers to offer immediate store credit. Returnly assumes the risk on the return and offers 85 percent of customers store credit on average, on the spot, according to a Forbes article. In most cases, the consumer promises to return the item.
While not stated policy, the internet is full of tales of customer service reps at Amazon.com, Walmart and Chewy.com, among others, telling customers to keep or donate an item they wanted to return and still receive a refund. Some such decisions seem to factor in the cost of returning and processing the item for resale.
- Returnly Makes Online Returns for Beauty & Intimates Friendlier for Shoppers and the Planet – Returnly
- ‘Returnless Refunds’: Is Retail Ready? – Women’s Wear Daily
- A Max Levchin-Backed Startup Raises $19 Million To Tackle Online Returns – Forbes
- Returnly Raises the Bar on Shopper Experience with $19M Series B from David Sacks’ Craft Ventures and Max Levchin – Returnly/Business Wire
Discussion Questions
DISCUSSION QUESTIONS: How would you assess the pros and cons of offering refunds for unwanted online purchases without requiring a physical return? Do you see the service working as a standard procedure for certain categories or more of a rare perk to support loyalty?
Poll
BrainTrust
Paula Rosenblum
Co-founder, RSR Research
Peter Charness
Retail Strategy - UST Global
This is a creative idea that has clearly already been in play. If a product is below a certain dollar value, then this is a great idea. It saves the retailer the cost of the return shipping and processing. Frankly, it has the potential of improving the brand image (free gift), and even spreading the news of the brand with WOM.
If you have it as a standard procedure, you risk the market learning about it and being flooded with fake returns. You just cannot count on everyone acting ethically.
The best option is to use it sparingly. Below a certain dollar value – gift the returnable item to the customer. For other items in the grey zone, gift the item to the customer randomly, or based on the customer profile. The order management system tells retailers who are chronic returners (don’t gift things to these folk), and who are good light returning customers. Reward your good customers.
I see this as a possible marketing campaign more than an active policy. For starters, not every business could use this program, especially when selling high ticket items. Second, any company offering the customer the opportunity to keep the unwanted product and still receive a credit has to be careful to control the returns. Once customers learn of this opportunity, many will attempt to take advantage regardless of whether they are happy with the product or not just to get away with not having to pay for it. If a company wanted to use this concept as a marketing campaign, they could do so stating something like, “we are so confident you’ll love our merchandise, we let you keep it if you’re unhappy and we’ll still refund the money.” Then the company could provide a healthy disclaimer in how the program works to deter those whose only motive is to take advantage of the opportunity and get the product for free. As a marketing campaign, the company could run it for 60 – 90 days and see how it goes before making it permanent.
Funny, we just talked to Returnly yesterday.
I think this is a straight up math problem. If it costs more to return and reprocess the product than there is margin in it to start with, it’s nicer, kinder and smarter to just have the customer throw it away.
When I was in the party supply business, if we received overages from paper stock (plates, etc.) vendors, they would often tell us to just keep it or toss it. Average cost of the item was 87 cents, retail $1.78. A dozen didn’t give you a lot of wiggle room for a return. Like I said, a math problem.
A great concept to save money by retailers. Returns processing has to be costly, and most returned products must be sold as “open box” or “refurbished” at a lesser price. This works well for high ticket items. I bet a retailer can still get a lot of money for a Patek Philippe refurbished piece. Not so for a pair of running shoes. Another company, Happy Returns, is trying to monetize the value of not sending returns directly back to the retailer (or manufacturer?) precisely because of the high cost of processing those returns.
Amazon already does this. We’ve had several incidents over the last two years where, upon attempting to return something, Amazon knocked off the charge and basically said, “keep it.” Considering the shipping and storage costs, etc., this is pretty smart thinking.
This seems to make sense when the item is something that cannot be resold or can only be sold at a price that exceeds the cost of processing the return and refurbishing. However, the cynic in me sees this policy being taken advantage of by people who use it to get free goods. There are several ways that this might be controlled just as they are in the brick-and-mortar world such as monitoring how many times a customer does this. Once the set limit is exceeded, it would require the item to be returned in order to get a refund.
I get the math and the goodwill value of this strategy. If it’s truly unusable or unsafe to “re-give,” I get that too. But I’m a little disappointed in any reference to a “throw it away” solution. Surely in most instances there are people or organizations who would gratefully make good use of unwanted items. It is well known that we, immorally, are a throwaway culture when it comes to perfectly good food. Now it seems that is extending into other things too. I believe doing what is right and good has pretty impressive math behind it too.
This is a smart idea that’s good for customer service and the environment.
It happened to me once in the U.K. when the wrong dinner service turned up after I placed an order with John Lewis. They told me they would send out the correct one right away and, if it was OK with me, to keep the one I had. I subsequently donated it to a charity shop.
The only downside is ensuring that dishonest people don’t take advantage and play the system.
This is really about the cost numbers driving marketing and customer experience behavior. As other BrainTrust members have stated, if the cost of completing the return is more than the available margin for an item that either can’t be resold or must be resold as a “refurbished” or discounted item, then it’s a win to let the customer keep it and refund them. I don’t think for most retailers this is something to define as a standard policy but to offer in special cases that warrant it. That will create a better sense of loyalty with customers and hopefully spread via word of mouth. Beyond health and beauty products as mentioned in the article, I believe this could apply to other product categories, again it’s just a function of the margin and cost to ship a return.
Hopefully there will be a message with the refund for the customer to consider dating the product — thrift stores sell intimates!
It seems to me that the “just keep it” policy combined with malicious intent = free stuff, to some segment of the population who will go to town with this option. It’s hard to argue with the math on cost of returns vs. margin. I’m more inclined towards the “donate it” idea, where the donation can be substantiated as having been done through a scan or a QR code at the donation center to validate that the customer did in fact donate the product. There’s still room for fraud if someone really wants to do it, but it’s more of a win/win all around AND the retailer should be able to claim a tax credit for each donation.
Great idea about the tax credit for the donated merchandise.
If the substantiated donation is tied to me receiving a refund, then you have shifted the cost of the return to the consumer. If I live 20 miles from town, I have to use my gas and my time to drive into town just to get a receipt for the donated product so I can get my money back. Doesn’t sound like a very good deal to me. Consumers having the option to keep it, toss it or donate it sounds much better.
This is all just common sense… something lacking in many other retailing decisions. As long as the value of the product does not significantly exceed the “clip level” for the cost of returns, and the retailer keeps track of abusive shoppers, this is the way to go.
Great conversation regarding the new reality, implications in digital retail, where returns of apparel goods can reach as much as 40%. Where I would typically argue “data and math,” it really does come down to a strategic business decision by traditional retailers to also bolster current customer service capabilities (the “human” common sense factor).
Yes, reviewing cost to return, customer LTV, returns history, etc. (to help reduce costs and prevent abuse) absolutely helps decision making process. However, at the end of the day, leaders like Amazon ARE VERY proficient, invested and skilled in balancing the data with “human” (CS) common sense. A core AMZN business strategy is after all “our vision is to be earth’s most customer-centric company.” As a pure play e-tailer (save WFM), what better way for Amazon to actually interact with customers than to enable the CS team with tools to exceed traditional retailer CS capabilities?
A blend of “data and math” combined with investment in human capital (CS) capabilities is leading practice. If a traditional retailer falls short on either or both, returns will continue to be a challenge.
I love Peter’s idea re: donations. This idea has so many benefits — to the retailer, the environment and our greater community. Brilliant!
As some have stated, several companies have already adopted this policy for certain items. The “certain items” is key, as it isn’t a realistic policy for high ticket items. Companies will need to monitor abuse of the policy and notify consumers if they are above a threshold of refunds without returning products.
Overall, this can be a cost effective strategy and we will likely see more retailers adopt this return policy.
This company obviously has more faith in human kind than I do. Surely people will quite quickly catch onto the fact that all they have to do is make a purchase, ask for a return, get your money back and keep your item. With the speed of social media this will get around so quickly that it could become a massive cost to online retailers very quickly.
Exactly. This will not end well, as rampant theft will now be considered free stuff with no consequences. Seems simple for those who don’t own this business but it won’t work, in my opinion
I agree. This is not going to end well. It is very difficult to identify and prevent malintent if the policy is publicly stated. I agree it is more expensive to process a return, but if the “keep the goods, we shall refund the money” is overused, the retailers are going to lose more. I lean more toward the “show me some proof that you have either thrown the product away or have donated it to someone.” I know this has its own limitations, but if what is needed to be shown is not a proper receipt then we would not have to drive to town to collect the same. Definitely not straight forward, needs some work
“Policy had to be abandoned because of rampant abuse” is an obituary I might expect to see for one of these practices shortly, but let’s not dwell on it. The danger for fraud is so obvious that even the most naïve e-tailer is taking steps to prevent it … right?
To me, the idea — which has both plusses and minuses (obviously related to the cost of the product) — points up that we still have a fundamental problem in how we account for transactions costs in online selling. Free returns and free shipping and free this, that and the other just exacerbate the problem.
I know young women who go to Sephora to put on makeup instead of buying it. I have to believe this would become a trend to return and keep rather than the altruistic ideas spouted here.
This is a great idea whose time has come. Below a certain value, items should be simply left to the consumer. This takes into account freight charges, reprocessing charges, and return management for the vendor. HBC items, small electronics (chargers, plugs, cables, etc.), fresh food, etc. all fall into this category. The consumer would only be aware of this policy for a particular item after the return process has been initiated. This would minimize abuse of the item (or category). Great idea, whose presence could be leveraged for other things which the consumer could determine. Great PR for the retailer and the supplier on top of this.
Tom – and every other thoughtful commenter here – thanks so much for your interest in Green Returns. Many of you have mentioned the high risk of return abuse with returnless refund policies. The machine learning behind Returnly’s offering is what makes returnless refunds possible without opening our partners up to this kind of fraud and abuse. We use proprietary behavioral shopper data combined with a merchant’s business rules, to make real-time decisions on who is eligible for this program.
Shoppers who don’t receive this offer still get the seamless returns experience they were expecting, while those who do are wowed by the merchant’s generosity to keep a product for free. We make these decisions in real-time and on top of it, issue store credit funded by Returnly so the shopper can get a new item while waiting for their refund to be complete.
I hope that answers some questions, but of course my team and I are open to deeper conversations if anyone would like to learn more.