Returns Leave Retailers Between Rock and Hard Place
By George Anderson
Customer returns are definitely a pain in the bottom line.
Okay, most returns are legitimate and retailers gladly accept them, but a large number are fraudulent and, based on the most not-so-recent figures from 2002, cost the industry
about $16 billion a year.
Clothing retailers, for example, are often faced with having to determine where the line is between making the customer happy and putting an end to return policy abuses.
According to a Knight Ridders Newspapers’ report, Alta, an upscale boutique in San Jose, Ca., accepted a return of an expensive blouse even though it had its tags removed
and smelled of perfume.
“It was a full-price item, and we had to toss it,” general manager Laura Swenson said. “But what can I do? We can’t clean it and resell it, so it was just a loss to us. Oh boy,
that irritates you when you have to do that. Everyone’s margins are tight.”
Some stores have begun using services that track chronic returners to help decrease the number of items coming back. Some stores have gone so far as to refuse items from customers
they deem to be abusing return policies.
While this may help decrease some instances of fraud, it hardly appears to be an answer when compared to the possible loss of business associated with offending customers who
have legitimate reason for making a return. A survey done by Newgistics and Harris Interactive found 85 percent of consumers said they would shop elsewhere if a retailer made
it difficult to return merchandise.
Moderator’s Comment: How do retailers deal with legitimate concerns about return fraud without alienating good customers? –
George Anderson – Moderator
This is a real slippery slope for the retailer. I believe the cost of lost customers will exceed the costs associated with returns for most retailers, with some clothing retailers possibly being the exception.
The only way that I can see to improve on this problem is for the retailer to go to great lengths to explain the problem to its customers and to be perceived as being very fair in its solutions. Honest consumers will want to help the retailer crack down on these abuses, but not if they think that it will cause them problems. I want to know that a retailer will stand behind what they sell and not hassle me if I have a legitimate return. I also share their anger and frustration with people that abuse that policy and would cooperate with them on realistic steps designed to curb the abuse. One method may be to track the frequency of returns, and the reasons stated for the return. I would think a pattern of abuse would form fairly quickly for some people. That should be compared to their volume of purchases to see what percentage of purchases they return and how large a customer are they, especially the net purchases after the returns are removed. Then deal with these customers on an individual basis and not change the store’s stated return policy because of a few abusers. These may very well be customers that that the store can’t afford to keep.
I see this fraud all the time in the supermarket. Why is it we don’t worry about the loss of future legitimate sales from the shoplifter who is now banned from the store? What’s the difference?
As Will Rodgers said, ‘Common sense ain’t that common.’ When I read things like this, that is what I come to as the simplest conclusion.
Just wondering why clothing stores don’t clean these items and develop a connection with a charity or a consignment shop. But then again, I suppose it had to be “tossed”.
It seems to me another example of failure to value the retail worker, teach them, and empower them to make sound decisions in dealing with your most valuable asset – your customer.
Sometimes rejecting a return is the right thing to do – sometimes it’s not. A retail worker that is valued, taught, coached and empowered can make the right decision.
Imagine the systems and databases that have been created to replace what a retail worker with sense could have taken care of in the first place. The problem is that due to the way they are valued, they aren’t around long enough to learn. Let’s build a tracking database instead. I bet the cost of a great training program would be a lot less and a lot more effective in the long run.
Well Scanner, that might be the ideal, but with today’s mega-stores, it would be quite easy for a bad-actor to find a different clerk on a different shift week after week after week. Well-trained clerks can’t stop what they don’t see.
Two retailers come to mind that have no-questions-asked policies: Nordstrom and REI. Both are known for great service, well-trained staff, and loyal customers. They aren’t particularly inexpensive either, to be sure.
I think a store has to find the right balance for itself. Nordstrom caters to upscale shoppers, and I’m sure they figure that the money they make off loyal shopper who buy knowing that if it doesn’t fit or they change their mind they can take it back is far greater than the occasional scam artist. REI will take stuff back after it’s been worn if you are unsatisfied because their loyal customers wear stuff out and come back every season for more.
Other stores that cater to price-conscious shoppers may not have that luxury. They are the ones marking receipts and such to try to cut down on fraud.
Well trained employees, and ongoing announcements of return policies may be the first step….especially during key selling and Holiday periods.
As has been mentioned, retailers’ image (especially in the non foods arenas) and how they are positioned in the marketplace should favorably alter the fraud issue.
One might assume loyal shoppers and ones given the service they desire from a retailer should reduce returns, in general.