One of the leading competitive edges that major retailers have over small businesses is a generous return policy.  Return policies give buyers faith in the company and generally make buyers more comfortable with shopping.  This especially holds true when it comes to making purchases online. Even though they’re shopping online, buyers want to still have the “try it out” experience as when they shop in person, knowing that they could return an item if it doesn’t suit their needs.

Why big guys *USED* to do it better?
They count on the fact that only 8% of sales will be returned; they would offer extended length return policies knowing full well that most people would make the purchase because of the policy, but never take advantage of it.

A short story about returns:
When I was 16 years old, I worked at a large retail sporting goods store. I was a cashier; my responsibilities included checking out customers as well as serving customers who returned items.  I once had a man come to my counter with one single flip-flop shoe. He wanted to return the shoe because he lost the other one while wearing them in the ocean.  I was taken aback, of course, but I followed protocol and asked him if he had the box and a receipt – he replied no to both.  So, I did not allow the return – he wasn’t having it and demanded to speak to my manager.  I was confident in my decision, so I had no fear of calling the manager in the back of the store and letting her know that a customer wanted to speak to her about a return.  When she came up to the front, she listened to story, verbally chastised me for not accepting the return and proceeded to accept the single flip-flop.  Aside from the clear lack of professionalism by rebuking me in front of a customer, the manager’s choice to accept that return was based on the old philosophy that the customer is always right.

Firstly – The customer is not always right. 

Secondly – With a solid and reflective return policy, you can prevent this kind of extreme situation from hurting your business.

Here’s the problem – The return rate for brick and mortar stores is 8%, but once the decade of e-commerce studies made its full circle, research has shown that online sales returns spike to 20% during the year, all the way up to 30% during the holidays.  So, while that manager at the sporting goods store was able to accommodate such an extreme return, it’s because it was so extremely rare, as well. But now, with the overwhelming majority of shoppers making purchases online, retailers have to become much savvier about dealing with returns.

The big guys are starting to learn their lessons. Famous for 100 years worth of forever-returns, even L.L. Bean has decided to limit their former infinite return policy to one calendar year, upon the reasonable condition of the product.

According to Consumer World, “Best Buy has added a 15-percent restocking fee for built-in appliances, drones, DSLR cameras and lenses, and a few other items,” while Target has employed the policy that “Items that are opened/damaged/receipt-less may be denied a refund or exchange.”

As you create your policy, be sure to check with your state’s retail return and refund policy code. Follow the laws of your state while simultaneously considering how to best appeal to your customers and still turn a profit.

When creating your policy, consider several factors:

  1. If the products you’re selling can be resold upon return (think apparel, toys, etc), you may be more inclined to offer a longer return policy.  If the products you’re selling cannot be resold, such as food, wine, or cosmetics, I would recommend a smaller window.
  2. Set clear and distinct time limits for returns. Be sure to make this information extremely easy to access.
  3. Create clear and distinct rules for conditions of acceptance. Will you take back only unused merchandise? Does it need tags? Does it need a receipt? Does the customer need a return authorization?
  4. Make purchases meaningful by using return-deterrents such as restocking fees.
  5. Consider your own margin of error in the return policy. For example: “There is a 15% restocking fee on all returns except in the case of manager’s defect.”
  6. Offer precise instructions for how a person should get the return to you.  I recommend that you write in that each person should insure their packages.
  7. Be clear about your acceptances – Will you accept returns? Only exchanges? Only store credit?
  8. Give timelines for when the refunds should be posted. Most banks will say between 7-10 business days.

One of the best ways to work on your own return policy is to read the policies of the companies you admire.  Don’t be discouraged by not being able to compete – your return policy compared to a big box store.  You are a small business and you need to do what is right to earn money for that business.

Kristen Fusaro-PizzoPresident

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