Study finds widespread benefit to lenient return policies

Discussion
Photo: RetailWire
Jan 29, 2016
Tom Ryan

New research from The University of Texas at Dallas has found that lenient return policies have a positive effect on consumers’ purchasing decisions in surprising ways.

Researchers analyzed 21 research papers that examined purchases, returns or both. They paid particular attention to how returns and purchases were affected by variations in five return policy elements: time, money, effort, scope and exchange.

The study challenged the underlying assumption that all return policies affect purchases and returns in a similar manner.

Overall, lenient return policies led to increased purchases, the study found. The researchers also found a positive effect — smaller, but still significant — from leniency on the number of returns. Leniency in scope (i.e., generosity in what items are considered “return-worthy”) also increased returns.

“In the pre-purchase stage, consumers might think about the costs and benefits of making a purchase,” said doctoral candidate Ryan Freling in a press release. “If the return policy is lenient in scope — if a sale item can be returned — a consumer might say, ‘Oh this is on sale. It seems like a good value. I’ll buy it, and if it’s not the right color or fit, I’ll return it.'”

But the study also showed return policy leniency should depend on objectives. If a retailer wants to stimulate purchases, offering more lenient monetary policies and low-effort policies may be effective.

If a retailer wishes to curb returns, longer deadlines to make a return have ironically proven to lessen the likelihood of a return. An offered explanation is the “endowment effect,” which suggests that the longer consumers possess a product, the more attached to it they become.

“The cost of dealing with returns affects the bottom line,” Prof. Freling said. “You want to look at the different dimensions of a return policy, because you may be able to manipulate the policy to achieve your goals.”

Are you convinced that lenient return policies drive greater purchases without being offset by increased returns? What lessons should retailers take from the study around manipulating return policies to support objectives?

Braintrust
"Whether or not one believes that a more lenient return policy drives greater purchases, better customer service just makes sense. With so many Internet sites offering free returns, consumers expect the same from brick-and-mortar stores."
"Wegmans tried a policy for a while where they would not take back perishables. It seems logic prevailed and they repealed the policy, but despite their reputation, we shop there very little now."
"It may seem counterintuitive that the most lenient policies are most helpful to a retailer’s results, but those policies really represent a key trust-building tool with customers and a way to build consumer loyalty over the long haul."

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12 Comments on "Study finds widespread benefit to lenient return policies"

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Ralph Jacobson
BrainTrust

If there is a persistent shopper perception that product returns are a pain to do at a particular retailer, my view is that shoppers will go elsewhere to substitute the purchase at a more lenient retailer. I also think that market research need to be done to confirm that whatever strategy is in place is actually achieving the desired outcomes. That is where many fall short. Strategy execution with returns and other objectives are often started with good intentions, however they seem to fail in real-world execution.

Max Goldberg
BrainTrust

Whether or not one believes that a more lenient return policy drives greater purchases, better customer service just makes sense. With so many Internet sites offering free returns, consumers expect the same from brick-and-mortar stores. Making consumers jump through hoops to make a return does not make sense. Retailers need to adjust their return policies to fit consumer expectations while not hurting their bottom line.

Ken Lonyai
BrainTrust

I agree with this totally and will admit that it very much describes me. For example, a few years ago it became noticeable that Home Depot loosened its return policy, so when I have a repair to make I know that I can overbuy potentially needed materials, not rush, and not worry about being stuck with leftovers. With the local hardware store, there’s something like a 10 to 14 day window. Sometimes I might not even start on the project in that time frame.

On the other side of the coin, Wegmans tried a policy for a while where they would not take back perishables, so if a consumer bought blueberries and opened the package at home to find moldy ones at the bottom, the store didn’t want to know about it. It seems logic prevailed and they repealed the policy, but despite their reputation, we shop there very little now.

Dick Seesel
BrainTrust

More than a tool to drive sales or margins, a store’s return policy should be considered a marketing tool. It may seem counterintuitive that the most lenient policies are most helpful to a retailer’s results, but those policies really represent a key trust-building tool with customers and a way to build consumer loyalty over the long haul.

My experience at Kohl’s — which has always had lenient policies in place — reinforces my perception. Individual buyers may have cringed (the customer returning a watch that he ran over with his truck for credit), but the big picture told a key story about the brand.

One caveat: Stores with liberal return policies are now grappling with the amount of online-only purchases being returned to brick-and-mortar stores. While this is a “cost of doing business” as an omnichannel retailer, it doesn’t mean that the logistical solutions are easy.

Richard J. George, Ph.D.
BrainTrust

The meta-analysis seem to support this conclusion and intuitively it makes sense as noted by the researchers, particularly the attachment or affinity claim. The biggest lesson is that retailers need to do what is necessary to keep their frequent and/or high volume purchasers. This might suggest a separate return policy based on the amount of the sale or the purchase history. Obviously, there are costs associated with more lenient return policies. However, it does not make good sense to develop a policy to protect the company from the 5 percent of the customers who may scam the retailer at the expense of the 95 percent who traditionally abide by the policy.

Perhaps the larger issue going forward is the impact of online sales on the retail industry and the relevant return attributes. I believe that effort or ease of return may prove to be a significant factor for online sales returns. Omnichannel retailer presence may be one way to enhance this return factor.

Debbie Hauss
BrainTrust

Especially during the holiday season it helps to have a longer, more lenient return policy. Gift-givers will have a greater comfort level purchasing a product if they know the recipient will have enough time to return or exchange the item. So yes, I think this study has validity in some ways. That said, I don’t think retailers should change their policies just for the holiday season. They should have a solid return policy in place year-round that employees and shoppers understand, so there is no confusion on either side. Confusion creates problems which impacts customer service negatively, driving brand-switching and a dip in loyalty.

Tom Redd
Guest

For sure — lenient returns taken with a smile drive more sales. As mentioned, Home Depot has it right. I return things there and only take a store credit. That way I can walk the store and get more real man tools. Great policy for the Depot. Macy’s and Kohl’s seem to do a nice job too, per my wife (on Kohl’s). Kroger is also great with food returns. No issues they just take it back.

Retailers need to make the process painless for the shopper but tight for the shrinkage side of things. Think shopper FIRST and no web retailer or other store will beat you.
One of Amazon’s fulfillment partners wanted to charge me 15 percent for re-stocking. I just tossed the item after slamming Amazon and spilling out super low ratings for the item. Re-stock is a joke in today’s retail world.

Dan Raftery
BrainTrust

Pretty sure this is not new news to most retailers and their suppliers, who are eventually involved in the financials. Budgeting for this expense is part of the cyclical policy negotiation process. As mentioned in a couple of posts above, online sales returns are the new wrinkle for all supply chain partners. Forecasts (budgets) for this are shots in the dark at this point, not just for “omnichannel operators.” Then there’s the unmentioned issue of return fraud. Remember coupon fraud? Its cousin is alive and well.

Shep Hyken
BrainTrust

A consumer wants to do business with the places they trust. The return policy adds a level of trust and confidence. That will lead to the purchase. The example on the article is perfect. I’ll try it and if I don’t like it, I’ll return it. If the lenient return policy wasn’t in place, the store might lose the sale.

The increase in sales hopefully outweighs the much smaller increase in returns. Furthermore, if the retailer has agreements with the manufacturers, then the cost of a return is just the labor to process it. Small gamble compared to the potential increase in sales.

Jack Pansegrau
Guest
Jack Pansegrau
1 year 4 months ago

I believe return policy builds the brand. When I think of retailers I shop — Amazon, Bed, Bath & Beyond, Costco, Trader Joe’s and REI quickly come to mind — I am never concerned about purchases and will often buy on a whim, knowing I can easily return. So not only do I have a “warm fuzzy” about the company, recommending them to everyone, I also purchase more. I am a loyal shopper. Isn’t this what every retailer is seeking?

As a counterpoint, I still hold a grudge against Best Buy for the restocking fee. As I recall it was in place for just a short time, but I still remember.

I do agree that if a few customers frequently abuse the policy, perhaps an annual percentage of sales limit could be instituted, or some other “friendly” algorithm to minimize the negative impact of the few so that good customers who rely on a fair return policy can continue to have it available.

Ed Rosenbaum
BrainTrust

This has been Publix’s belief and policy for as long as I can remember. If you bought it at Publix, you can return it to Publix. One sure way to keep the customer coming back is to let them know if they are not happy for any reason they can return it.

Sabrina Gray
Guest
Sabrina Gray
1 year 4 months ago
Lenient return policies have been adopted as part of the customer engagement protocol in retailers that want to retain customer loyalty. I have seen this begin to backfire in the sense that in accepting every and anything back for the sake of customer satisfaction in hopes that they will spend more has resulted in the disengagement of employees. This is particularly higher in commissioned environments where the associate loses the commission and then ends up “owing” their employer for the lost commission resulting from the return. When there is a disengaged staff because you are hitting their bottom line to save yours, companies have then created a system that will not only result in higher staff turnover, internal theft, but also lower customer services standards. There needs to be a balance as to what is acceptable to pacify both external and internal consumer for companies. While the study does have some validation, one size does not fit all and in a commissioned environment, return policies have to be adjusted to fit the employee compensation module. In-store credits should be the standard, so that the customer will inevitably spend more, but retailers refunds are often to the original form of payment… Read more »
wpDiscuz
Braintrust
"Whether or not one believes that a more lenient return policy drives greater purchases, better customer service just makes sense. With so many Internet sites offering free returns, consumers expect the same from brick-and-mortar stores."
"Wegmans tried a policy for a while where they would not take back perishables. It seems logic prevailed and they repealed the policy, but despite their reputation, we shop there very little now."
"It may seem counterintuitive that the most lenient policies are most helpful to a retailer’s results, but those policies really represent a key trust-building tool with customers and a way to build consumer loyalty over the long haul."

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