Product Returns: The Most Expensive Preventable Problem

By Tricina Elliker

Your return policy is more important than you might realize. Before buying a product online, the majority of shoppers look at a company’s return policy. In fact, a whopping 84% of respondents say free returns are the deciding factor in whether or not they choose to go through the checkout process while another survey found 88% of shoppers look at how easy the return process is before they buy online.

Return policies get more lenient

Consumers are so interested in company return policies that curated lists of policies for different retailers have popped up on costumer care sites all over, detailing just how lenient different companies are and when customers can expect to see the credit in their accounts. It’s no surprise then that recent articles on return management encourage liberal return policies and manage them quickly and efficiently.

Apple, Nordstrom, Eddie Bauer, Costco — What do these brands have in common? They’re all known for having loyal customers and generous return policies. More and more companies are advertising 100% satisfaction guarantees and an open invitation for customers to test drive their products. These brands tend to be more expensive, big-ticket items and offering a liberal return policy is likely to nudge potential customers past their hesitation. But even some food sellers are getting on board: Trader Joe’s and Whole Foods display large signs in their stores encouraging returns for opened items (even half-eaten products can be returned).

But this isn’t entirely a new concept. REI has had a liberal return policy for decades. So much so that customers have joked that the outdoor retailer initialism stood for “Return Every Item.” — In actuality, it stands for “Recreational Equipment , Inc.” but there was a kernel of truth in the tongue-in-cheek name. Until 2013 REI employees were told to ask for the reason of the return but encouraged to accept nearly everything. One man famously returned a forty-year-old snow suit. The policy has since changed and today the company only accepts items bought within the last year, a drastic difference but still vastly more lenient than most companies.

Refunds are expensive for brands

It’s no surprise that many retailers balk at the idea of such a lax return policy. That kind of service is expensive. In 2014, Americans returned $284 billion worth of merchandise, and that number is only expected to grow as consumers demand more lenient return policies. Companies, meanwhile, remain vigilant in the face of fraudulent returns. A 2015 report by the National Retail Federation estimates annual fraudulent returns in the U.S. cost retailers $15.9 billion each year. It’s tricky to balance the very real possibility of losing business against unscrupulous customers who abuse lenient return policies.

 

 

The sharp increase in return policy interest on the part of shoppers can be traced back to the growth of online shopping. While it’s great to peruse  many different stores without leaving the comfort of your couch, knowing whether those products will actually fit or work for your needs isn’t so easy to do in a virtual environment. And retailers know it. But they’re struggling to find the best way forward as they search for a way to prevent the rising cost of returns while still delivering today’s most coveted retail perks: free shipping and easy returns.

Proactive customer support can prevent returns

In fact, a 2012 Accenture report noted that 68% of returned electronics weren’t returned because there was a specific problem. This tells us that many customers actually experience preventable issues with their products, issues that if solved, could prevent a significant portion of returns.

Consider the many consumers who buy cameras or tablets for elderly family members. The customer themselves might know that if the loved one just took some time to learn how to use the product, they would get enormous value from it. But after many failed unboxing experiences customers turn to youtube videos to learn about their new products ultimately driving traffic away from the brand’s site due to lack of support after purchase raising the stakes that loved one learns it’s easiest just to return these kinds products. This problem is so common, in fact, that unboxing videos have become an extremely lucrative avenue for YouTubers. Customers find the simple act of setting up a product so helpful, one unboxing channel on YouTube made $4.9 million in 2014.

While companies have been slow to adopt new tactics to help their customers set up and troubleshoot products, several new startups, like Enjoy, have launched to fill this void. Enjoy’s customers can order tech products, like phones and tablets, online and have a real expert deliver it and set it up with the recipient. The company even goes the extra mile, downloading apps and setting up features based on what they know about the recipient. This approach to customer care has been so successful that Enjoy says their return rate is only 1.4% — well below the usual 22% for tech. The Enjoy model might not be scalable for widespread use, since at the moment the product prices aren’t marked up at all. This leads to the likely conclusion that the product’s brands are eating the extra cost of employee setup and delivery time. Still, it showcases the need for customer care long after the point of sale.

This is an area that’s only recently begun to get real attention, says Philip Paisnel, an e-commerce executive who’s been analyzing the industry approach to returns for decades now. While every product used to come with a dry user manual printed in a minuscule front many times poorly written, companies like Ring (who make a smart doorbell) are trying out other ways of giving instructions with short videos and instructional gifs. “Manufacturers are starting to think about the ways people use their electronic products and use them to help answer questions and alleviate issues before the customer gets to the point where they get irate.”

If only the company made an effort to help customers get the most of their products, they could prevent returns while keeping sales high. “You can alleviate it by being proactive,” says Paisnel.

Customer experience after the sale

Take Zappos, a company that built their brand on their customer service and return policies. From the beginning, Zappos offered free shipping and returns on any item. Not the right size? Return them! Color not quite right? Return! There’s no limit on the number of returns a customer can have. But even they have some limit on returns. That said, they don’t simply turn away from a customer if the product isn’t eligible for a return.

When one Zappos customer found his new shoes still gave him blisters, even after he logged 450 miles in them, he thought he was stuck with the wrong footwear for his feet. Still, he tracked down the customer service number and talked through his options with a Zappos representative. Since he no longer had the original packaging, they weren’t willing to offer a full refund but they were happy to exchange the shoes for a new size and give him a $35 credit since the shoes had dropped in price since he’d bought them— 450 miles ago. When the new shoes arrived there was a handwritten note from the representative he’d spoken to.

While the customer was obviously hoping for a refund the amount of time and attention Zappos gave him in order to resolve the problem and make sure he walked away happy was that the customer remembered. He wrote, “I was dumbfounded. They really do want to make their customers feel special.”

Most customers aren’t itching to return their items. And the interest in return policies acts as a sort of litmus test to gauge how eager the brand is to make sure customers are happy with their purchase. While offering generous return policies may soon be a requisite for being in the retail business, a clear focus on bolstering customer experience after the sale may be the key to getting ahead of the competition. Your customers really just want to know that their happiness matters to you and that once you have their money, you’re not simply going to leave them hanging if the product isn’t what they expected.

How many of those $284 billion dollars worth of returns could be prevented if companies simply took the time to answer questions and work through issues with the customer? Only time will tell.

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