Too Many Unhappy Returns
It’s buyer’s remorse big time this holiday season. Shoppers are again expected to return a large chunk of the holiday gifts they bought this year before the gifting even takes place, and some of that problem may be self-inflicted by retailers.
Liquidation.com, which buys returned merchandise from traditional retailers and auctions it to bargain-bin stores, says return rates are 12 percent to 15 percent this holiday season so far, two percentage points higher than last year and double the rate in better times, according to an article in the Associated Press.
According to the National Retail Federation’s Return Fraud Survey of 103 retailers taken in October, 9.94 percent of holiday items are expected to be returned this year on average for the entire season. That’s slightly up from 9.8 percent in 2010 and notably above the 8.77 percent rate seen in 2007.
For retailers, the costs of returns include receiving, assessing, repairing, re-boxing, restocking and reselling returned products. Further, additional markdowns may be involved if the item is returned later in the season or after Christmas.
According to the AP report, one reason customers appear to returning more items early is due to the down economy.
“When the bills come in and the money isn’t there, you have to return,” Jennifer Kersten, 33, of Miami told the AP. She spent $300 the day over the Thanksgiving weekend on gifts for her nephews only to return half of it the following week.
The article stated that shoppers are “binging on big discounts” in the excitement of the many deals found across retail, only to eventually face “buyer’s remorse” at home after re-assessing their budgets. Stores are also apparently undercutting one another with customers returning items bought at one retailer after discovering a cheaper price elsewhere. Finally, friendlier return policies are said to be part of the problem.
Accenture believes making sure customers are happy with the purchase before they leave the store would dramatically reduce return risks. According to a survey of executives from communications carriers, consumer electronics retailing and consumer electronics manufacturing companies, only 5 percent of returns are related to actual product defects. Twenty-seven percent reflected “buyer’s remorse” with 68 percent of returned products ultimately characterized as “No Trouble Found.”
“Most companies invest considerable sums to manage returns, but need to refocus their strategies on proactively preventing returns through customer education and aftermarket support,” said Mitch Cline, managing director of Accenture’s Electronics & High-Tech group, in a statement.
- From Black Friday to back Monday: Stores are seeing huge returns, but not the kind they want – Associated Press
- Return Fraud Survey – National Retail Federation
- Returns and Repairs Services for the Electronics and High Tech Industry – Accenture
- U.S. Consumer Electronics Industry Faces a Projected $17 Billion Product Returns Bill This Year, Accenture Research Finds – Accenture
Discussion Questions
Discussion questions: What further steps could retailers take to reduce return rates? Are there ways to ensure customers are more satisfied with their purchases before leaving the store to avoid a later return? What do you think is causing the apparent increase in holiday returns over the last few years?
Is the return problem centered on high end electronics and tech gear, or on apparel? It’s important to have the answer before developing a solution. If the former, it’s correct that sales associates should make sure the consumer understands how something works before the register is rung. (We all know from personal experience that this doesn’t always happen.) But clearly there is a correlation between tighter household budgets and higher return rates, so the trend may not improve until the economy is on firmer footing.
At the same time, stores should view liberal return policies as a positive way to drive business, not a negative cost. There is no doubt that retailers with “no hassle” programs have used them as a marketing tool and loyalty driver. Like almost everything else in retail, returns are expressed as a percentage of top line sales…so it’s important to drive those sales with a variety of tactics and policies.
This is where the in-store customer experience comes into play. Associates should be trained (there’s that pesky problem again) to be knowledgeable about the products they sell, and make sure that the customer is happy with their purchase before they leave the store.
Brick & mortar apparel retailers are currently bumping up against 15 to 20% return rates! They fail to drive the customer to the fitting room and engage with them to ensure that the items meet the customers purchase criteria of fit and function before they leave the store.
I don’t believe that ‘shopping hangovers’ are the biggest problem. Not servicing the customer at the point of purchase and making it extremely easy to return items is the problem. If retailers would allocate payroll to train associates to service the customer at the time of purchase they wouldn’t need the payroll to process returns that ultimately end up on the sale rack.
As stated in the article, the higher level of returns is a function of buyer’s remorse and cutthroat pricing. The thrill of a deal drives many consumers to make purchases, only to return the item when they’ve had a chance to reconsider the purchase in the quiet environment of home. And why should they not return an item when another retailer offers the same product for less?
Retailers got themselves into this situation through dramatic discounting and training consumers to wait for the best deal.
Returns are a fact of life. And while the economy remains sluggish, they will be an ever-growing line item in retailers’ budgets.
I do like the idea of after-purchase support programs. That would be an interesting pursuit for some shopping marketing agencies to pursue as a programming objective. I imagine that engagement programs involving consumption would be the way to go. The success could be measured against the percentage that would’ve returned goods without the program (say a regional control group), thus paying for the campaign.
I’m starting from the assumption that many shoppers are satisfied with the items they bought, but simply come back to reality after the holidays. As marketers and retailers, we are constantly improving in creating and enhancing desires. But mortgage payments and other living expenses get in the way of the dreams we create.
In many respects, returns are just the reality of retail during the holidays. Yes, as pointed out above, liberal return policies are important to drive the business, and better trained staff would help reduce some returns.
But, let’s look forward. If you know a lot of customers will be coming back in with returns, it would make a lot of sense to train the staff on how to turn that refund into another sale. Too often, the items are just returned and no attempts are made to make a sale. When you refund money to a customer … you know they have money! Might as well try to make a sale, don’t you think?
The customer is always “right.” A no hassle return policy is the best policy to have. You never want to put the associate in the position of dissatisfying the customer. Electronic receipts, no receipt necessary for members of the loyalty program and placing the return on a gift card are all solid methods to support loss prevention issues.
Hmmmm…I wonder if the spike in returns was partially due to an increase in operating hours and heavier than normal web traffic on Thanksgiving Day?
Apparel is not a surprise when returns are encountered. “Making sure the customer is satisfied with the fit and encouraging them to go try on” — seriously? Sure, let’s push the customer to try things on in the midst of holiday crush. This suggestion is unrealistic — work the floor of the store in apparel and experience first hand how totally insane the fitting rooms are. It’s difficult to find a “free” room, let alone that it is much more pleasant for the customer to try on at home, and get the opinion of mom and friends. Why do you think retailers have pushed for mobile phone snapshots to get friends’ opinions? To avoid returns!
Buyer’s remorse or post-purchase dissonance is the result of poor alignment of sellers and buyers…not an issue between sellers undercutting, or making it easier to return items…This is a part of the holiday season that simply gets put into the entire retailing puzzle and then spread out over the year for suppliers to manage as part of their returns process.
Hmmm…let’s see: retailers can tighten their return policies, thereby alienating customers and avoiding the sale in the first place…no sale = no (possibility of) return! Probably not the answer people are looking for. The reality is, big discounts and over-promotion are designed to attract fence-sitters, so it’s almost certain there will be more returns in this group; either there’s no profit in a promo, and it should be stopped, or there is, and you just have to deal with the cost. My question: does the increase in returns match the (supposed) “big” increase in sales this year (i.e. net sales didn’t really increase much at all)? That really would be ho-ho-horrible, wouldn’t it?
There are still too many (from the consumers’ point of view) impulse buys. These purchases can be in virtually all product segments. The issue is that few people actually take a reasonable amount of time to select gifts based upon what the recipient has wished for and the cost of the gift as it relates to the shoppers’ monthly budget. Even fewer people rationalize gift shopping as a whole expense that they will have to pay off when the bills come.
The main thing I see retailers contributing to this issue is that they have made the purchase process so quick and easy. Then, after the purchase, the customer realizes that they spent too much for the total number of gifts they bought. That’s NOT something, however, that I’d recommend the retailers change!