From the Co-Founders of The Retail Owners Institute.Tips | Tactics | Insights on the Business of Retailing.
How important is it to have - and brag about - a “free and easy” return policy?
That is an issue that vexes many retailers.
Processing and handling returns can be costly and time-consuming.
But, there also are "costs" associated with more restrictive return policies.
A two-year study comparing return policies of two similar retailers offers some new insights.
But first, some (reassuring) background.
Apparently 48% of shoppers say that their top reason for choosing a retailer is a flexible returns policy.
However, according to a 2016 Holiday Shopping Trends survey from the National Retail Federation, “On average, two-thirds of consumers say that they didn’t return any of their gifts.”
But, as is often the case, perception is everything! Apparently the availability of an easy returns policy is good enough for most customers.
So, how important is it to have a “free and easy” return policy? Here's how a study by Washington & Lee University examined that issue. It compared two similar online retailers:
– one offered free shipping on returns
– the other required the customer to pay shipping costs to return items.
What happened? Over a two-year period, average spending per customer was four times greater ($2,500 versus $620) for the retailer offering “free and easy” returns!
Wow! That's impressive, isn't it?
Lessons for ALL Retailers
We believe the lessons from this apply to brick-and-mortar retailers as well.
What about your store's return policy? How is it perceived? Does it seem “free and easy”, or is it restrictive?
If you require that items must be returned within a very short window of time, or can only be returned for “store credit”, you may be protecting yourself from being “ripped off”.
But you also may be assuring yourself of missing out on future sales.
Bigger yet, customers that do trust you as a retailer are very likely to shop with you more frequently. And they tell others!
Are there costs? Of course!
Some customers will abuse it.
Some merchandise will not be able to be returned to your shelves. (For that, consider Ebay or Amazon for liquidating it yourself, or use some of the so-called “return services” to recoup costs.)
But consider the cost/benefit comparison. What does a “free and easy” return policy really do?
It builds confidence and trust with your customer.
It keeps them coming back, and spending more! ($2,500 vs $620, remember?)
Maybe most important of all: if you have a no-hassle returns policy, be sure to merchandise it!
"If you've got it, flaunt it!"
Hmm. Maybe it’s time to quit focusing on returned merchandise. Concentrate instead on those “returning customers!” And do whatever it takes to have many happy CUSTOMER returns!
Used especially by large national chains, it applies technology to accept or reject attempted returns.
Have questions about your return being denied? The store employee directs you to contact the return authorization service.
Well, that's one way to handle returns, isn't it? And it may be very appropriate for large national chains that are particularly susceptible to fraud or so-called "returnaholics."
But for local retailers, return policies are one of the most complex management issues in retailing.
The National Retail Federation sponsored a survey in early May of retail small business owners across the country (those that meet the SBA definitions for employee size and revenue.) Contrary to the doom-and-gloom of the "Retail Armageddon" stories, this survey confirmed that retail owners are optimistic and looking to expand.
Few believe their business will be in worse shape in 12 months;
Nearly half expect revenues to increase;
Many have goals for expansion or implementation of new technologies.
Here's a revealing factoid from Bloomberg News: "Of the people who use social media, one in three makes a purchase every month through a platform such as Instagram, Facebook, Pinterest or Snapchat."
It's a trend you may not like, but heads up, folks. It's a tsunami!
How to deal with the turmoil and stress of today's retail environment?
Recent strategic changes by two global firms – McDonald's and 7-Eleven – offer good reminders for us all.
Each of these long-established businesses dealt with their growth challenges first by listening to their customers (using good data analysis and research).
Then, what they chose to do next offers some "food for thought" for all retailers.
The ROI NEWS asked retailers this question about the effectiveness of Social Media: “Does it raise sales?!”
We invited retailers to take a short, quick, 6-question survey about their use of promotional tools in general, and, in particular, “Social Media”: Facebook, Twitter, Pinterest, Instagram, LinkedIn, Other.
We asked, and you answered!
You quickly confirmed that “social media” is in fact a hot topic among retailers!
And, you are willing to share your experience with it with others, and for that we say, Thank You!!
Pat Johnson and Dick Outcalt, The Co-Founders of The Retail Owners Institute®, have been called "The Zen masters of retail finance!" Since 1999, they have been assembling their proprietary content into a unique self-help website. The Retail Owners Institute is an unmatched resource that assists retailers worldwide with basic financial training, assistance and easy-to-use tools. Their engaging and empowering how-to resources about the financial levers in retailing are informative, fun(!), and retailer-friendly. Their promise: "Everyone will 'get it'!" Pat and Dick are recognized experts in strategic retailing. Working only as a team – Outcalt & Johnson: Retail Strategists, LLC – they have been consulting, publishing, and speaking professionally throughout North America since 1990. They focus exclusively on retail, or wherever retail is involved. They work with CEOs, CFOs, boards and owners of retail operations, as well as manufacturers or wholesalers expanding into retail. And they also are Retail Turnaround Experts.
Since 1999, empowering retailers and store owners to "Turn on your financial headlights!"