HOW RETURN POLICIES WORK
Return policies are the rules retail merchants establish to manage the process by which customers return or exchange unwanted or defective merchandise that they have purchased previously. Return policies are an extension of the customer service retailers provide, and thus are often fairly liberal. Retail stores in most developed countries tend to be generous in their return policies. After all, if the customer is satisfied, the customer will come back. As a result of their experience with liberal return policies, many consumers hold the mistaken belief that they can always return merchandise for a full refund, regardless of the circumstances. But in reality, both regular and online merchants enjoy great leeway in establishing their own individual return policies. As returns have become more prevalent and more costly, some merchants have imposed tighter restrictions on merchandise returns.
The most generous return policies – which are usually found at large, upscale retailers – permit customers to return any merchandise at any time for full refund, with or without any receipt. But most retailers place restrictions on one or more aspects of this process. For example, many merchants will not accept merchandise for return unless the customer can produce a dated receipt provided that he or she actually purchased the item at that store within a reasonable amount of time. Other merchants have a slightly more liberal return policies and will accept items without a receipt as long as the sale tag is still attached. Still others will provide a store credit rather than a cash refund when no receipt is forthcoming. Some retailers have even tighter return policies and prohibit returns on sales merchandise or on certain types of items, like bathing suits, or impose a limited window of time when returns are accepted.
The goal for retailers is to balance the need to satisfy customers against the cost and hassle associated with merchandise returns. Setting too liberal policies may encourage customers to abuse the system. For example, a customer might purchase a dress for a formal occasion, wear it once, and then return it. Similarly, a customer might purchase a top-of-the-line computer, use it for several months until an even faster model becomes available, and then return it. So how do retailers make a balance, protecting themselves from return abuses while at the same time maintaining customer satisfaction? This can be a particularly important issue for small business owners, who depend on superior customer service to keep people coming back to their shops and websites.
Larger merchants can generally afford to be more liberal in allowing returns. And smaller outfits may need to raise prices in order to compensate for the added expense. After all, returned items that cannot be resold must either be returned to the manufacturer or sold to a jobber, which costs the retailer extra in transaction and transportation fees.
There are several steps brick-and-mortar retailers can take to discourage abuse of their return policies. For example, they can attempt to reduce the volume of sales returns by clearly posting return policies, spelling them out on tags, and training staff to explain them to each customer. It can be advantageous for retailers to vary their return policies from product to product. Policies can be generous for items that hold their value for a long period of time or that can be resold at a high value. Conversely, policies can be tighter for items that lose their value quickly, like computers, or are difficult to resell or otherwise dispose of.
Returns in E-Commerce
Establishing fair return policies while limiting the cost of returns is of particular importance to online retailers. After all, returns are a fact of life in electronic commerce. How well you handle online returns will likely determine your future success – or failure – in the dotcom world. Unfortunately, returned merchandise is a major byproduct of increased Internet growth, especially as consumers become much more comfortable purchasing items over the Net. Some experts claim that the nature of electronic commerce invites large numbers of merchandise returns because consumers are not able to see and touch the items they purchase online. Recent technological developments have addressed this problem, however, and enhanced the online shopping experience. There is incredible technology at work in making touch, feel, color, look, size, and fit issues more user-friendly.
A recent survey found that 86 percent of online shoppers rated return policies of significant importance in choosing an online merchant. Consumers were especially concerned about whether the policies permitted them to receive a refund immediately items were returned, return inline purchases to a brick-and-mortar stores, exchange items as need, and have the convenience of postal pickup at their homes. But the number one priority of online shoppers was not having to pay return postage for items they ship back to e-tailers. In a survey of the top 50 online merchants, however, 85 percent said they required customers to pay return postage. Requiring customers to pay for shipping tends to discourage frivolous returns, according to some online retailers.
According to another survey, the main reasons online shoppers returned their purchases included: that the product was not what they expected (25 percent); that the product did not fit properly (17 percent); that the merchandise was damaged (17 percent); that the wrong items were delivered (16 percent); that the products were of poor quality (10 percent); and that they simply changed their minds and did not want the product (15 percent). Of the consumers who returned items purchased online, 78 percent said they were satisfied with the experience, while only 6 percent described it as unsatisfactory. Of those who had a bad experience returning the merchandise, however, 62 percent said they would not return to the offending website afterward.
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