Les Jones

E-commerce > Limiting Customer Returns

Tuesday E-commerce Report #18

(Yeah, it's a day early. Blogging may be erratic this week. We have a dinner party tonight and several house guests this week.)

MSNBC has a story about retailers tracking returns and denying what they feel are excess returns.

I ran into something like this about five years ago when I started remodeling my house. I learned that Home Depot didn't require receipts, so I stopped bothering to even look for the receipt when I returned something. Home Depot eventually flagged my account and told me that from then on I could only get store credit for returns without the receipt. Result: I started looking for my receipts when I took things back to Home Depot. They had disabused me of a bad habit they themselves had taught me.

Some people abuse the return system even more, buying an item for a single use and then returning it. When I bought a camcorder before Katie was born, a salesman at Circuit City made sure I knew that their return policy for camcorders was that the unit had to be returned in 14 days, and there was a re-stocking fee of 15%. The reason? People were buying camcorders to tape high school graduations, vacations, etc., and then returning them.

Clothing stores run the same risk when they make it easy for customers to return an unlimited number of items to the store. Instead of trying things on in the store, people learn that it's just as easy to buy the clothes, try them on at home, and return them if they don't fit. That puts an extra burden on the store, which has to process a return at the register, put the item back on the shelf, re-sticker the item, and hope that it's still in season or hasn't been discontinued. Returns are also a favorite way for shoplifters to get turn loot into cash, effectively using the store to fence its own goods at full price.

Return policies should be fair to the customers, but if they're too liberal they wind up driving up prices and punishing all customers.

E-commerce Returns

Note that some of these policies only work for higher-priced items.

• Whenever possible, defective items under warranty should be returned to the manufacturer by the customer. We found in trying to process defective returns on our own that we often had only the customer's word that the item was defective. If the distributor or manufacturer disagreed, we often got stuck with an open-box item that couldn't be sold as new.
• If you decide to take non-defective returns, reserve the right to charge a re-stocking fee to discourage people from comparison shopping after the fact, or using you as a source of free demos. A re-stocking fee of 15% seems to be common, and is what we use. Do not refund shipping fees.
• Require customers to speak to a customer service representative to obtain an RMA (return merchandise authorization) number before returning an item. Log the RMA number along with a date and reason for the return. Then give the customer the return address and ask them to put the RMA number on the outside of the shipping container. When the return arrives, your shipping department can check the RMA number against the RMA log and know how to proceed.
• When customers ask about returns, give them the worst case scenario. It's better if you under-promise and over-deliver. If a customer balks at your return policy and decides not to buy, consider yourself lucky. You probably just dodged a return.
• Place time limits on returns. Thirty days seems to be a common limit.