If you consider product returns one giant, expensive headache, you aren’t alone. However, satisfactory returns can actually benefit retail businesses. According to a study conducted by J. Andrew Petersen of the University of North Carolina and V. Kumar of Georgia State University, leniency (within reason) toward customer returns can improve business by eliminating customers’ fear of purchasing an item they know they cannot return. Among one group of retailers participating in the study, 45 percent saw an increase in profits per customer over a period of six months and 29 percent, over a period of three years as a result of a lenient product returns policy. These policies can yield:
- Positive word-of-mouth advertising. Just as customers will tell their friends and family if they have bad experiences with product returns in your store, they’ll also pass on the word if they have no trouble with returns — even if they’re highly dissatisfied with the products themselves. Additionally, by making returns easy and transforming returns into good customer experiences, customers will be more likely to post good feedback and reviews on social media and Internet sites like Facebook and Yelp.
- Increased repeat business. If customers receive hassle-free assistance during the return process, you can almost guarantee it will increase the likelihood they’ll return to your store again — rather than risk patronizing a competitor whose product returns policy is unknown to them. Consider these statistics from the study Petersen and Kumar: Retailers report as many as 75 percent of their regular customers have returned a product. This means a large number of customers of their stores have returned products, but continue to patronize them.
- Better insight into product issues. Investigating the reason for returns can yield a wealth of information you can act upon to improve your business. For example, are customers returning a particular item because it isn’t what they’re really looking for and if so, what do they actually want? Are certain products often damaged or defective? The answers to these questions can help you identify product-related issues and react to them in a manner that will enhance your business.
- Better insight into sales. Admittedly, high return rates — particularly high return rates on one or more specific items can indicate that something is amiss in a store’s merchandise mix or with its vendors. But ironically, stagnating product returns can be a signal of slow sales in certain merchandise categories. Once you’re aware of this situation, you can remedy it through multiple business-boosting strategies, such as bringing in new merchandise assortments, upping customer engagement through marketing and other efforts, or creating displays that more effectively capture customers’ attention.
Clearly, product returns aren’t always going to be a positive thing for business. Returns take labor to manage, require restocking, and, of course, refunds or credit. The process can also be vulnerable to fraud. But returns are inevitable. A strategy that anticipates returns, prepares staff to handle them professionally, and uses the process to build customer relationships will result in the above benefits to your business, as well as your bottom line.
