May 26, 2016

How a Lenient Return Policy Can Actually Boost Sales


return

Did your retail store still deal with returns from the holiday shopping season? If so, you’re not alone. If you’re dreaming of higher sales and fewer returns in 2016, you might want to implement a more lenient return policy. That’s the surprising conclusion of a recent study by researchers at the University of Texas-Dallas.

With more than $280 million (PDF) in product returns across all U.S. retailers in 2014, and the number of returns increasing exponentially due to the rise of ecommerce, there’s growing interest in how return policies can affect a retailer’s bottom line. The study’s authors found that there are five basic elements of a return policy that retailers can adjust to get different results:

  1. Time — the length of time a customer has to make the return,
  2. Money — whether or not the customer receives full reimbursement for the product or only partial reimbursement,
  3. Effort — whether the customer has to have a receipt, bring in original packaging or fill out a form to get a return,
  4. Scope — whether the type of merchandise eligible for return is limited (such as “final sale” items that can’t be returned), and
  5. Exchange — whether customers receive money or store credit for returns.

Want to Limit the Number of Returns?

Limit the scope. Return policies that were lenient in scope were found to increase the number of returns. If customers know they can return even sale items, a sale price is more likely to sway them to buy. However, limiting scope did not help increase sales.

You can also limit returns by offering lenient timelines — that is, giving customers more time to return items. Counterintuitively, this actually led to lower returns. The study’s authors theorize that the longer customers have a product in their possession, the more they get attached to it and the less likely they are to return it. There’s also an inertia effect at work — without the urgency of having to make a decision in, say, two weeks, customers may let a product lie around until the return window has expired.

Want to Increase Sales?

Then try a lenient return policy that’s lenient in terms of both effort and money. (In other words, no receipt required and full money back). This increases sales because consumers who come back to your store for a return are more likely to buy something new. Knowing your return policy is generous, they’re also more likely to keep shopping with you because they’re confident they can always get their money back.

Returns cost you money, of course, so in developing your return policy, it’s important to decide what your overall goal is. Do you care more about limiting returns or increasing sales? You’ll need to run some numbers to determine which will benefit you more financially. You should also consider how “return-worthy” something is — can it be resold, or is its value essentially lost? This is why many retailers don’t accept returns on sale items that are typically slow movers or past-season products that are hard to sell in the first place.

Whatever type of return policy you implement, make sure it’s clearly stated at the point of purchase, or you could end up with angry customers. Place prominent signage near the point of sale; include the return policy on receipts and, if the item is not eligible for return (such as final sale products), have salespeople inform customers before they pay to make sure they’re okay with that.

Shopping Photo via Shutterstock

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Rieva Lesonsky


Rieva Lesonsky Rieva Lesonsky is a Columnist for Small Business Trends covering employment, retail trends and women in business. She is CEO of GrowBiz Media, a media company that helps entrepreneurs start and grow their businesses. Follow her on Google+ and visit her blog, SmallBizDaily, to get the scoop on business trends and free TrendCast reports.

One Reaction

  1. It can boost sales because people will have the safety of knowing that they can return the products if it does not meet their needs. Because of the option, they will likely put down their guard and trust the brand more.

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