Return Policies Can Put You Out Of Business

Brands are making changes to their return policies, and customers are not happy with them. One of retailers’ main value propositions is how easy they are to do business with, which includes no-hassle returns. This falls under the banner of convenience. Our annual?customer experience research?indicates that 53% of consumers would pay more to receive a convenient experience, and 76% would switch to another company if they found out that it was more convenient to do business with. Easy returns translate to higher levels of convenience.

A recent?RetailWire article?shared stats and findings about returns. The numbers are surprisingly large—in a bad way—and retailers are having a hard time ignoring them. According to the National Retail Federation, last year’s online returns accounted for “approximately $212 billion,” which is 16.5% of all online sales. That’s one sixth of all purchases, a huge number that may be hard for some retailers to swallow.

Shippo’s annual consumer report, in conjunction with The Harris Poll, estimates that the cost of returns for some items comes in at 66% of the original price. The result is that retailers are changing their policies, and according to the study, 72% of customers have noticed, many—54%—after being “blindsided” by the change in a retailer’s return policy.

Retailers did this to themselves. They competed on a value proposition that became a problem and at the same time became an expectation. It’s like free shipping, which used to be a competitive differentiator. Now it is expected from most retailers. And that’s exactly what has happened with free and easy returns. It’s become a common expectation.

Shippo’s report noted the following changes that retailers are making:

• Requiring exchange for another product.
• Giving store credit instead of cash refunds.
• Shrinking the return window.
• Allowing only in-person returns.

Furthermore, the Shippo report found that “four out of five American consumers (80%) say if an online retailer they regularly purchase from made their return policy more difficult, they would purchase from a different retailer with a more favorable return policy instead.” That aligns with the general finding (76%) for overall convenience.

Some companies get it. For example, Zappos, the online shoe retailer, prides itself on easy returns. They even suggest buying several sizes of identical shoes and returning the ones that don’t fit. And here’s the exciting part of that strategy. Zappos does not have the lowest prices, but somehow, wins its customers’ hearts (and dollars) with great service and convenience.

Zel Bianco, RetailWire brain trust member, president and CEO of Interactive Edge, says, “The e-commerce industry has made its bed, and now it wants to change the rules? Not so fast, as the potential loss of customers that switch to a different retailer is too high.”

As leaders, we are forced to make big strategic decisions. Not all of these decisions will make customers happy, but that’s okay. Transparency is a good start. Changing a return policy may upset customers, so tell them why you’re doing it. Or raise the price to accommodate the existing policy, and again, explain why.

So, there are two reasons (at least) return policies can put a retailer out of business: not having a friendly, convenient policy and the cost of not properly managing the liberal and easy return policy.

Retailers must walk a fine line between the cost of convenience and the cost of losing customers due to lack of convenience. It could be as simple as building it into the price, which could work if your customers aren’t focused on low price. Or maybe delivering amazing value in the form of great service, high convenience and easy returns, like Zappos does, which trumps the low price and wins customers because of the overall experience.

Shep Hyken?is a customer service and customer experience expert, keynote speaker, and New York Times bestselling business author.?Learn more about Shep's?virtual?training programs?and follow?#ShepHyken?for more insights on customer service and experience.

This article was originally published on?Forbes.

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