Posted by in Customer experience, Marketing, Operations, Retail, Small Business

Nearly one in five consumers will return a gift from the holiday season. Some will find that returning merchandise is not as easy to do as in the past as retailers tighten up policies to reduce fraud and protect the bottom line.

Some retailers will continue to offer liberal return policies and even seek to use them as a means to differentiate from competitors in the market.

So, the question I’ve been mulling over the past few weeks; do liberal return policies affect good customer service?

Return policies probably play a bigger role in the purchase of gifts than in general purchases. They also are more of concern for electronics and computers, jewellery and women’s clothing.

We all know there is a small percentage of serial returners that can really reduce a retailer’s profit margin. Many items are damaged; the packaging is messed up and simply can’t be put out for sale again, even if there is nothing wrong with the item. Just like there are big loyal spenders; there are customers who return nearly everything they buy. And, there are customers who will return damaged and or used items even if they caused the damage/wear.

So, I think there has to be a liberal policy for the 95% of shoppers who behave normally, and a custom tailored one for those individuals who serially abuse the system.

Liberal policies are appreciated by customers and not likely to be overused. However, it is important to make restrictions clear.

Some chain and independent retailers have clearly tapped into an effort to embrace their shoppers and create a long-term relationship of trust and good will. As long as customers like the products available, the return policy is a competitive advantage and probably a less costly investment than much of the media spending which puts most retailers on an even playing field.

Promoting the return policy generates an air of credibility along with generosity and a positive customer experience. There is enough history in the retail industry to illustrate what works and what doesn’t work.

Unfortunately, there are many retailers that don’t want to advertise/promote their return policy, or decide to make it as difficult for the customer to return the item as possible based on the belief that it will help to reduce the number of returns they will ultimately get from the consumer. This is patently false, as customers don’t purchase goods to return them but generally do so for the following reasons:

1. The product did not meet their expectation (holiday gifts)

2. The product was damaged or did not function properly

3. The product did not fit, etc. and needs to be exchanged (holiday gifts)

4. The delivery experience did not meet expectation (e-commerce/catalogue only)

Understanding that this is an oversimplified view of the world, those merchants that clearly state their policies, set customer expectations, and are committed to making sure the customer is satisfied with the shopping experience are the ones that will ultimately gain the most in terms of immediate revenue gains and long term growth tied to customer loyalty.

The world of retailing is so competitive today in terms of price and product availability, merchants have to do something to differentiate themselves from one another – and one of the easiest ways to do that is through a comprehensive, easily understood returns policy. A bad policy is not only a barrier to securing the sale in the first place, but up to 85% of respondents in a recent survey have said they will not shop with a merchant again if they have a negative return experience. It simply is not worth the risk for a retailer in an effort to try and save a little here or a little there.

The reality is that a punitive returns policy only affects the retailer/customer relationship when a customer tries to return merchandise. But that impact can be profound. I’ve seen “daisy chain” emails and blogs regarding poor returns experiences that make egregious courtroom dramas look forgiving in comparison.

I would also suggest that process is equally as important if not more important than policy. A return of any type is a point of dissatisfaction. It’s an experience of interaction with your customer. The process of how it’s handled regardless of policy can determine if it’s your last interaction or simply one in many to come.

So the real impact of a returns policy on the business is probably a “slow build”–but permanent.