December 27, 2007
Consumers Face Stricter Return Policies
By Tom Ryan
Abuses by a few have led to less liberal return policies for many shoppers this holiday season.
Fraudulent post-holiday returns are expected to top $3.7 billion this year, up from $3.5 billion in 2006, according to the NRF. As a result, many retailers are reinforcing or introducing new policies to reduce return fraud.
Among the preventive measures:
- This
year, Costco tightened its return policies that had been open-ended for all
but computers. It is now 90 days for TVs, computers, cameras and other electronics.
The chain found that some consumers were continually returning older tech gadgets
for newer models. Costco estimated that its no-questions-asked policy was responsible
for losses of more than $100 million a year; - A newer trend finds some retailers
(Lowe’s, Kmart, Wal-Mart, Barnes & Noble, etc.) using computer systems to
monitor customers returns. If a customer brings back too many within a short
period of time, the retailer might not accept them. Last year, for example,
Express and The Limited for the first time explicitly disclosed return limits
on the back of sales slips: five returns within any 90 day period with a
receipt, or only up to $300 without a receipt; - Sears, Roebuck and Co. maintains a broad
15 percent restocking fee, introduced in 2005 on select items including home
appliances, electronics, and sporting goods not returned unused with full
packaging. Best Buy and Circuit City have similar fees; - JC Penney requires special occasion
dresses to be returned with the “return tag” still in place. This thwarts
shoppers from “wardrobing” for a one-time wearing; - Target limits returns without
receipts to just two per year, and only for items worth less than $20; - Amazon.com will not accept returns of items that are missing
the serial number or UPC square on the box.
However, many stores don’t do much because they don’t want to annoy the average customer looking to bring back product for legitimate reasons. Most stores gladly fix or replace a defective product. Some, such as Nordstrom, accept most items with few questions. Others have even loosened their policies this holiday. Best Buy normally demands returns within 30 days, but customers have until Jan. 31, 2008 to return things purchased from Nov. 1 to Dec. 24.
“Many retailers offer more lenient return policies during the holiday season to accommodate honest customers,” Joseph LaRocca, NRF vice president of loss prevention, told The Denver Post. “But unfortunately, retailers must constantly balance the desire to take care of their customers with the undisputed fact that criminals are constantly looking to take advantage of return policies.”
Discussion Questions: Should retailers in general be more or less restrictive in their return policies? What can retailers do to prevent “serial returners” from frustrating the return process for average customers?
Discussion Questions
Poll
BrainTrust
Recent Discussions
More Discussions
How Can Retailers Crack the Gen Z ‘Riddle’?
Gen Z is becoming an increasingly important consumer demographic, but an elusive one to map. How…Does Bath & Body Works’ Scented Holiday Campaign Pass the Sniff Test?
Bath & Body Works is kicking off a new campaign with scent being at the fore…Which Tech Will Solve In-Store Inventory Woes?
Three major tech lineups are looking to solve retail inventory problems. Which is most suited?
Retailers should state reasons for justifying stricter return policies. Although Nordstrom does seem to be the exception to the rule, I am inclined to believe that loyalty is NOT a function of return policy alone. Many other variables contribute to customer loyalty levels.
A reasonable person should understand the 90-day electronics policy or the “no returns” policy for outlet items at a trendy apparel store like BCBG/MaxAzria. The product life cycle is SHORT and does not extend past 3 months!
I agree with Odonna–effectively communicating the return policy to consumers is fair. Retailers have alternative options to deliver value to their consumers. The return policy is not the only tactic retailers can flex.
Customer service has to be of paramount importance to any retailer interested in increasing its sales. Many retailers that sell clothes do not offer adequate, if any, dressing room space for customers to try on clothing. They should not penalize consumers for making returns.
On the other hand, I can understand Costco’s decision to limit returns on electronics to 90 days. They clearly state this return policy at the customer service desk and even at the displays of electronic merchandise.
Each retailer is going to have to find a policy that fits. Consumers will then be the judge of whether that policy is ultimately successful.
With the databases that retailers now have of their customers, it should be easy to direct their attention to the people that are abusing return policies. Applying harsher policies to everyone will hurt their business–and should. They will just drive more business to the Internet and that is not what they want.
I actually hate the term ‘return policy’! Anything to do with customer service should not be policy unless satisfying the customer is your policy.
I was speaking with one of my smaller clients about the subject and I told him that my major concern is: will the staff enforce this policy 100 percent or will they be sensitive to customer service? And without a doubt, customer service went out the window and the returns desk turned into a paramilitary outpost with the sole purpose of keeping customers out of the store.
Yes return fraud is bad. But chains should never persecute the bulk of their customers for the actions of a few. Chains need to invest in training their associates in handling returns properly. It’s not just about taking the product back, it’s about providing outstanding service and possibly turning that return into a sale or a future sale. There are steps retailers can take to reduce fraud and staff needs to be trained specifically for return counter duty. How many times have we seen a cashier called up for a return or a stock associate doing returns, or when the customer has to wait for a supervisor to authorize a 99 cent return?
I look at returns as another selling opportunity for the store. Retailers need to capitalize (and some have) on the return interaction.
Return policy economics have some hidden conditions. #1: some retailers can more easily charge their suppliers back for unsalable returns and #2: some shoppers, particularly in apparel, buy wide varieties, fully intending to try them on at home, and return the excess. Many folks feel a lot more comfortable modeling clothes at home, compared to store changing rooms. Every retailer needs to make a financial as well as a marketing assessment of return policies.
In this era of pervasive customer loyalty programs, retailers need two policies for returns. The first is for the anonymous customer. The second is for the loyal, preferred customer who shows a transaction history with no abuse of their return privileges. The first policy should be wary of abuse. The second should not.
When I was just starting out in life, I had bought a bicycle for my young son at Sears. The pedals were cast iron and one of them broke after a year. I took it back to get a replacement part as was told to pick out a new bike. I told them my son had grown and that it would not be fair. The Sears rep told me it didn’t matter, just take a bike. That sold me. Come hell or high water for the next twenty-five years, I was a loyal Sears shopper.
Then one day I brought a vacuum cleaner into Sears for service. Sears service told me that it would be cheaper to order the part off the floor. I went to the floor and they refused to sell me the part saying that they would only sell me a new vacuum. I went back and forth and could not get the vacuum fixed.
I finally wrote to the president of Sears. He never responded and I have never been in a Sears since, over the last thirteen years.
As long as return policies are stated clearly and prominently to consumers, it’s fair. Having the return policy printed on the bottom of the receipt is also beneficial to the customer and the retailer. That way the time period for returns is clear. Offering store credit is another way to limit losses and encourage repeat sales.
Let’s face it, no one likes arguments at the customer service counter.
Another short sighted effort to save a penny. Sure there’s abuse, there always has been. If it has gotten out of hand, it’s because of poor training at the service counter. If you have a problem with some consumers, then deal with them. Don’t be so stupid as to implement a policy that penalizes your good customers. Remember, most of these people walked into your stores to buy, they can just as easily walk to the competition.
On the returns, yes, customer service is crucial but so is maintaining a profit. Fortunately, a lenient–but realistic–returns policy will often be both.
Let’s take the classic example: what to do about the customer buying clothes for a big party and then returning them the next day, in effect getting a free overnight clothing lease? I’ll speak heresy here: Let ’em.
The store will make far more money from new honest customers who will appreciate the trusting treatment rather dollars lost to a few who either can’t afford it or are being deliberately cheap.
What about consumers who return an excessive quantity of items? Heresy again: Let ’em. Most are honest customers who will appreciate the convenience of the policy. Costco won far more customers–and revenue–from their relaxed policies than they lost to fraud. (Note: The new Costco rules STILL have them far more customer friendly than almost any other national chain.)
All that said, insisting on receipts is quite fair. But for the honest customer who can’t find it, have your POS system easily searchable by customer service. The idea is not to penalize a customer who didn’t remember to bring their receipt. It’s to stop truly fraudulent efforts.
That’s the key problem. Many of the returns halted are NOT situations where customer service thought it was a true fraud. Were they thinking of calling the police?
Are your customer people serving the return-attempting customer or are they looking for any excuse to reject them? Doron’s point is the right one.
Restrictive return policies are another symptom of dramatically narrowing margins for many chains. And it’s further evidence that in order to protect those margins they are prepared to sacrifice customer service.
Fraudulent returns have been a growing problem, but the solution is not to abandon a critical level of service that customers expect. The solution lies in both the technology and training to better recognize fraudulent situations, and address them specifically.
For many of the smaller and independent retailers that I work with, this lapse in focus on the customer and their expectations represents another critical opportunity to carve out a competitive point of differentiation.