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Is Your Return Policy Hurting Your Small Business?

Is Your Return Policy Hurting Your Small Business?

Meet Ritchie Sayner, vice president of business development for RMSA, Retail Solutions and volunteer for SCORE. In addition to speaking to retail groups at educational programs nationwide, Sayner contributes articles regularly to industry publications. His website, www.write4retail.com, was created as a resource for retailers. He is also the author of the recently released book, Retail Revelations-Strategies for Improving Sales, Margins, and Turnover available at RSayner@rmsa.com.

Let’s be honest…who really likes returns? As retailers, you are in the business of selling merchandise, not taking it back, right?

After all, returns take time and generally mean the customer had a negative experience with the merchandise or simply had a change of heart and now their problem is soon going to become your problem.

Full disclosure here, that used to be my mindset. I dreaded seeing our bags coming back in the store. My hunch is that a lot of you may feel the same way.

Over the years, returns of retail sales have steadily increased with 9 percent of retail sales being returned, according to the Kurt Salmon consulting firm. The latest figures available suggest that returns in 2014 hit $284 billion, up 6.2 percent from the previous year. Some attribute this increase to online shopping since a third of online purchases come back.

I decided to poll a cross-section of retailers that I consult with to find out what their return policies are. I wasn’t terribly surprised with what I learned.  It appears that the smaller the volume a store does, the stricter their return policy is. The general consensus being that they feel they simply can’t afford a more liberal policy, thus opting for store credits in lieu of cash refunds and a tighter window in which returns are accepted.

Larger volume operations on the other hand approach this issue with a completely different philosophy, or so it would seem. Larger stores in general adopt the approach that “if the customer isn’t happy, they probably aren’t coming back." They also seem to allow the customer a longer period of time in which to make a decision on the merchandise. Thirty days appears to be the norm.

Other discoveries from my unscientific poll were that final sale items were not returnable. That seems reasonable to me, unless the product is defective in which case it should become a vendor issue. Most retailers responded that any returns had to have the sales receipt and could not show any signs of wear.

Again, larger volume retailers are a bit more lenient here. One store, in particular, actually advertises that customers can exchange footwear they have worn if the pair isn’t working for them within 30 days. A liberal policy like that takes away any fear a customer may have regarding the purchase.

Might a case be made that larger volume stores became that way over time because among other things, they were willing to do what the customer wanted them to do? Next time you are confronted with a questionable return, try asking the customer what they would like you to do to make them happy. 

If a store credit is going to annoy a customer to the point of creating hard feelings is it really worth it? To the stores that feel they must keep the money “in the store” it might be time to rethink this approach. I contend you keep more money in the store in the long run by making the customer happy. That may mean giving more cash refunds.

Looking at returns from another perspective we might see that the customer has made yet another visit to our store. How can we make this a positive experience for everyone? The customer had to spend their time and money to come back into the store to return something that they feel justified about.

I will offer an idea that is sure to garner an eye roll from some.  Consider offering a customer a $5 credit “for their trouble” once you have completed the return/exchange to their satisfaction? That might get some very positive kudos on Yelp. Believe me, that $5 will come back to you in multiples. You have to give to get!

Wow, that makes me want to buy…not!  How about something more customer-centric, such as All Sales Are Final When You Are Completely Satisfied. My belief is that smaller stores would grow their volume by actually promoting a more liberal return policy emphasizing complete customer satisfaction. Many smaller stores see themselves at the mercy of the Internet due to its sheer magnitude as well as the whims of larger retailers. Believe me: tightening up the return policy does nothing to promote combat this.

I know of one merchant who took back a pair of shoes he never carried because the customer was adamant that the shoes were purchased at his store. His mindset being, I can refuse this unjustified return and guarantee I will never see this person in my store again AND risk additional negative social media backlash or I can graciously accept the return, ask the customer what she would like us to do and hopefully turn a negative into a positive. You might say he chose to lose the battle, yet win the war.

There are times when a retailer should mark down a customer. If you have a customer who habitually takes advantage of your return policy or is abusive to your employees, it may be time for them to take their business to a competitor. Obviously your store is not a good match for this customer and in some cases it is best to part company.

Revisit your return policy; talk with your store managers, sales associates and even a few of your better customers. Is your return policy hurting your business? Remember, however, never make a rule that affects the many based on the actions of a few.

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Want more retail tips? Check out Ritche's Top 10 Secrets to Retail Success. When you're ready for more resources on marketing and sales for your startup or small business, try out our Resource Navigator. Our interactive database will connect you to the right resources your challenge, industry and business stage. Looking for more hands-on assistance—or just like talking to real folk? Give us a call at 816.235.6500 and we’ll guide you to the right resources for your business.

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