I hated returns when I was in the catalog business. I viewed returns, not without reason, as margin-killing time-wasters. The returned merchandise was often unsellable due to customer damage, missing items, or shopworn packaging. I had employees who did nothing all day but handle returns. In our lower-margin lines, I calculated I’d have to sell ten more products to make up for the expense of one return. We always kept smiling while we authorized returns, but inside I was cringing. And I wasn’t the only return-hater. Years ago, it was a common practice in some mail order segments to ship products in packaging the consumer had to tear apart to open, meaning that any return involved the added inconvenience of locating new packaging for the return.
Today’s customer demands a good return policy. It’s safe to say that most Web, catalog, and in-person retailers still aren’t overly thrilled with taking products back, though. (I just bought an apparel item from a firm that has a 5 day return window, provides no return label, and emphasizes that not only do you pay for shipping, but if you exchange the item you’ll pay the shipping fee on that item too.) I hurts to say it considering my past return experience, but I think these retailers who try to make returns difficult are wrong. Love your returns, and you’ll gain a competitive edge.
Pain of Returning?
I’ve written a lot about buying pain and the pain of paying. Researchers have documented that when subjects see a price that seems too high, the pain center in their brain lights up.
To my knowledge, no researcher has had subjects read return policies while in an fMRI machine, but it doesn’t seem like a huge leap to think that an unfriendly return policy might have an effect similar to a high price. Indeed, if I think about an awkward return – a bulky item I’ll have to repackage, an expensive UPS charge, or the possibility that my return will be rejected because I failed to comply with some provision of the seller’s policies – I know I experience a mild sense of dread. (Ever buy a big-screen TV online? Ever wonder how the heck you’d repackage it and ship it back if you had to? Scary stuff…)
Winning with Returns
Some of our biggest success stories in recent years have been firms that embraced returns and made ease of returning products a core part of their strategy. Zappos is a perfect example, because they attacked the women’s footwear market with an extremely friendly shipping and return policy. Women’s shoes, one would think, are a terrible product to sell mail order. Fit is critical and highly variable, precise color is important – a high rate of returns is a certainty. Not only that, just getting women to buy is a challenge, because of the difficulty of returns – it’s a lot easier to try on a few sizes in a store vs. dealing with return shipping hassles and delays. In What’s a Return Policy Worth, we saw that women’s shoe buyers assigned a high value to a return policy – $16 per item, vs. a mere $3 for men’s shirts.
Zappos rocketed to a billion dollars in sales in part by taking the pain out of returns. They shipped quickly, overnight for many buyers, and made returns painless by absorbing shipping costs and making the process amazingly simple. For many buyers, Zappos made Web shopping more convenient than going to a retail store, even for a variable product like women’s shoes. Above all, they developed an exceptionally loyal base of customers who didn’t want to comparison-shop every purchase.
Convenience has a price. If you are absorbing shipping costs both ways, it’s certain that your cost per return will be higher. Even if you aren’t quite that generous, simple, convenient returns can raise your return rate even as customer satisfaction rises. Smart businesses cut their return rate not by increasing customer inconvenience but by improving products and systems. Amazon has done a brilliant job of this.
For a retailer selling everything under the sun, usually at highly competitive prices, Amazon has very smooth return procedures. They clearly work to minimize returns by not only providing detailed information of their own but enabling customer reviews. I’ve avoided buying many products there that had mediocre ratings, and have had my product selection guided with customer advice like, “This product runs small, be sure to order a size larger than you normally would.” Amazon offers some product in minimal packaging – a simple cardboard box vs. a fancy blister pack. I don’t know if this costs less from the manufacturer, but it certainly makes return processing simpler. Unlike a package that the customer has to destroy to get inside (sadly, the standard for many retail items), Amazon’s plain box can likely return to the shelf if it comes back.
Is it a big surprise that when Zappos was acquired, Amazon was the buyer?
Returns for Everyone?
I’m sure there are some businesses that simply can’t afford to take all the pain out of returns. But before you jump to the conclusion that your business is one of those, look at Zappos. How many people would have said that women’s shoes was a category that simply couldn’t support no-cost, ultra-easy returns? Don’t expect overnight success; some customers will need to experience a painless return before they are converted to loyal buyers.
Back to my big-screen TV example: what if an electronics seller offered to send someone to my house to repack and pick up my TV if necessary? There would definitely be an “option value” for that assurance. On, say, a $2,000 TV, would I pay an extra $50? Most likely. Would I pay $500 more? Probably not. There’s definitely a value there, and presumably even with that policy the number of customers opting to send their TV back would be relatively low.
Remember that a key part of a friendly return policy is doing everything you can to minimize the need for returns. Detailed sizing and use information, lots of product detail and specs, customer reviews and ratings, etc. can help ensure the product is right from the start. Monitoring returns by product and vendor becomes more important, too. High return products may need to be explained better, have special notes added to their copy, or even be dropped.
And if you do adopt a great return policy, don’t hide it. Promote it. Customers DO assign a dollar value to it, and you’ll gain a perceived price advantage. If you have competition, and prices are competitive, a great return policy will give you the edge.