Management: How to Deal With Returns

When Product Behaves Like A Bad Lunch

There are few things that are more disconcerting for retailers than returns. We spend a lot of money to sell a product and when that product is returned it almost adds insult to injury. I would suggest however, that not all returns are the same, some might even be good for us. If a customer returns something that is damaged or defective for example, I would rather know about it and replace my mistake with the proper item rather than have the customer keep it and just say to themselves “I will never buy anything at that store again.” Every store should have a return policy, a statement that both customers and staff understand, that governs how we will manage returns when they happen and this policy should be posted for everyone to see. Some retailers are now having the back of their register tape printed with their return policy and this is a great way of informing customers but your staff should point it out to customers as they hand them the receipt.

There are many causes and types of returns, however, I would like to talk about three broad categories and what I would suggest is a fair and competitive policy for each. You should regularly check stores in your community to make sure that your return policies are not only competitive but also match your store brand promise. It is difficult to be a full price, full service store and have a return policy that is more restrictive than Wal-Mart. The three categories of returns are what I call, the righteous return, the defective return and the less than righteous return.
The Righteous Return
This is a return that is within 30 days of purchase, with a store receipt, the item is in perfect condition and can be resold with no problem. Often the customer changed their mind about the purchase or received another one as a gift. In the case of a righteous return we should first attempt to exchange the item for something else in the store, if that is not possible, then we should offer a gift card or full refund. The key factors in this return are that there is a receipt and it is within a thirty day period. If there is no receipt and you cannot verify date of purchase or even method of payment you could consider either a gift card at the lowest price sold or if you suspect that it could be a shoplifted item, then offer a store credit but not in the form of a gift card or certificate which has much more value on the second hand market (it has been estimated that over half of the gift cards sold on eBay are from fraudulent returns). Potential fraud will be further reduced if you state that your policy is to send the credit note to the customer’s home. Most shoplifters will not give you a valid address and if you also collect a phone number, simply call before you send the credit to check the zip code and you will often find that the phone number is not valid. Then you simply do not send the store credit. Shoplifters will quickly learn that it does not pay to steal and return from your store. However, if you are able to link over 95% of your sales to a specific customer name, this and many other issues go away.
The Defective Return
This return is an item that has a defect or damage that is not the customer’s fault. We sold them a product that was damaged or defective and the problem did not surface until after they got it home or started to use it. This is the most serious of all returns. The customer trusted us to provide them with a first quality product and we let them down. This return requires a sincere apology to the customer, an assurance that it should never have happened and will never happen again, replacement of the item and, if possible, a free upgrade to the next higher priced item as a way of apologizing for the customer’s wasted time in having to come back with the item. If you cannot upgrade them, then you need to offer another “perk” that proves you are sorry. A $5 gift card is a nice touch or even more if it was a high priced item or the customer had to travel a long way to bring it back. If you give this perk, you will turn a bad experience for the customer into an incredible advertisement for your store.
The Less than Righteous Return
Far and away this is the toughest for any retailer to handle. It is a return of an item that you do not feel is justified. The item may appear to have been worn or used and it is not defective and cannot be returned to stock for sale. It will be a write-off if you take it back. This type of return tests the true customer centric strategy of every retailer. If you assume that the customer is lying about using and or abusing the product and refuse the return you may alienate that customer and never see them again. However if you give in and replace the item or issue a refund you could be setting a precedent that will cost you a great deal of money. This type of return can only be properly dealt with if you have a customer data base.

You only have to work in retail for about a day to know that the customer is not always right. There are customers who will take advantage of us and simply rent product and not even pay the rent. But there are also great customers who sometimes make a mistake and will try to get it rectified without admitting culpability. The latter customer however will feel guilty and purge that guilt by buying more in your store. If you are gracious with this customer it will be the cheapest word of mouth advertising that you will ever buy. But how do you tell the difference between these two customers? The only answer is the data base. Would you give a customer who spent over $800 in your store in the past six months trouble over a $50 return? I don’t think so. But what if you have no history on this customer? What if they just started shopping in your store? I would suggest in that case that you take a chance and invest in the customer by giving them the benefit of the doubt and issue an exchange or refund as requested. But track this transaction, add the customer to your preferred list (prefer that they don’t shop here!) and if they try the same type of return in the next six months, then simply refuse the return.

We cannot pass up the opportunity to invest in a good relationship and at the same time we have to protect the store from almost criminal behavior. A great customer data base will help you make this tough call when it happens.

Establish your policies, make sure everyone in the store knows them, publish them so your customers are aware and be prepared to be flexible for your best customers.

Former retail executive Jim Dion is now a leading retail consultant and author and a regular contributor to Running Intelligence and a featured speaker at The Running Event. To learn more about Jim, visit his website, http://www.dionco.com

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