Updated: Jul 25, 2019
A primary goal of any retail operation is return customers. So why do so many retailers view returns with such disdain?
Roughly 10% of all sales in store are returned. That number increases somewhere between 30-40% for online sales. In and of themselves these stats are problematic, but here’s the the big picture: no matter what you do, returns are going to happen! Your store is too compelling, your staff too inviting and your product too desirable. Customers buy unsuitable items because they want to to be a part of your story. So don’t blame them for thinking you're great.
I’m not saying you shouldn’t try to reduce the number of returns (see how to reduce returns), but I am saying that changing the way you view returns will increase your sales and solidify long term customer loyalty.
So why do customers make returns to begin with?
Would you be surprised if I told you that you are at fault for all returns?! Well, it’s true. The top two reasons for a return is the result of a gift or the customer had second thoughts. Either way the customer believed in your brand, your image and how they would feel with your product so much so that they took a risk on something that wasn't quite right. After a sober second thought, away from your amazingness, they realised they were wrong. It doesn't fit. They can't really afford it. It's not really them. …They now have a regret. You, your store, your product and all your marketing efforts are now tied to a regret. In fact, between 10 and 40% of all your transactions are resulting in regret. Wow! If you had a staff member causing this much friction you would be on high damage control.
Staring down the barrel of your personal bias; you miss the big picture.
As a manager or owner your bonus is tied to how well your store performs. Every return is a loss of profit, distraction for sales and a product that may be outside it’s prime selling window by 30 days. I can see why that would upset you. But don’t let that distract you from the big picture. Put aside your short-term disappointment and see the opportunity standing in front of you. This customer that has proven to be a ‘buying' customer. Or at the very least a customer about to receive a credit note; ready to spend.
Rather than showing appreciation for buying and trying, customers are met with the Spanish inquisition!… Nobody expects the Spanish inquisition!! (I couldn’t resist.) — Is that really fair? They believed. They paid money. They made a mistake and now you want to punish them with a snotty attitude or implied guilt? Really? Are you trying to discourage them from ever buying again? The sooner you recognise this individual as a VIP, the sooner you return to the win column. Give your very best service.
Acknowledge that this customer had to to go through the obligation of returning rather than the desire to return to your store.
Thank them! Invite them to relax while you process the return. Show them how much you appreciate them and the opportunity to turn that failed purchase into a better purchase. Ask open ended questions to see if you can turn a return into an exchange. Talk to them. A return is your opportunity to see how your product is failing and turn that failure around.
When you inspect the returned item explain everything you are doing. Explain how you will check the product for defects, items left in pockets, damage or scent (smoke or perfume). Be thorough but forgiving. Show your VIP that you want them to stay. That there is no regret with purchasing in your store. Make this an experience! Don’t mail it in. Don’t rubber stamp it and move on. This is a VIP moment. Be present. The more you can do to absolve them of their mistake, the better your chances of creating a new sale.
Here is a true story to illustrate my point:
Last summer I purchased a shirt at Banana Republic in North Conway in New Hampshire. From the line I could see the cashier pleasantly greet each customer. That demeanour changed once I informed him that I wanted to make a return and repurchase with an online discount my wife had previously received through her email. The cashier dutifully punched the screen, scanned the item and handed it back. He then leaned on the monitor and looked past us. After a pause a new receipt tumbled out and was handed to me. Not a word was said. I wouldn’t go so far as to say he was rude, but it didn’t even meet the low bar of "have a nice day".
So here’s what you don’t know. The cashier was probably one of the store managers (an educated guess based on age and the body language). To him, every corporate discount offered is a reduction against his sales quota - the deciding factor in his bonus. Added to this mix, I’m a tourist. He doesn’t see me as a regular or big spender, but he’s wrong on both accounts. This thinking is so incredibly short-sighted. I visit North Conway every year on my way to and from my vacation in Maine. On this particular occasion my wife, upon returning with her coupon had reconsidered a scarf she had passed on earlier in the day. The coupon worked! We were back in the store and adding to our cart. In the end the scarf was left on the counter. This return really did resulted in a loss of sale.
Finally I'll leave you with this quote:
Craig Adkins, former VP of services and operations at Zappos once told FastCompany
“Our best customers have the highest returns rates, but they are also the ones that spend the most money with us and are our most profitable customers.”
UPDATE: A study at the University of Texas, Dallas found that a lenient return policy led to higher sales across the more than 11,000 retailers examined.
— Washington post article January 22, 2016
Do you still have reservations? Let me guess: you are worried about theft!
Read the next blog:
In this post I dig into the hard numbers to reveal the true impact of return fraud.
Read the next post “to catch a thief”