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: 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?