As per Federal Law, merchants are not required to give a full refund on returned items if they are not defective or damaged or if refund is not part of the return policy. However, there are some State Laws that further addresses refunds and returns.
Retailers’ relationship with customers should be built on a strong foundation. Just like any other type of relationship, TRUST builds a strong foundation. However, a strong foundation can crumble if the reason for that foundation is what was broken. Trust can be easy or hard to establish depending on the parties involved, but it is definitely very easy to lose. Even the longest and strongest relationship can easily fail by a single act of distrust.
Non-fraudulent customers will have different reasons for returning an item they purchased from your store like damaged goods, not fit for your need, “misled” or “misdescribed” sales, customer realized it was the wrong item, etc. Regardless if the return was due to manufacturer, store personnel, or customer, all returns need to be handled fairly and appropriate. The ultimate goal is to have a win-win resolution for both the retailer and customer. Fraudulent customers need to be handled differently and wisely.
Stores who implement unfair, unreasonable, and strict return policies will have unhappy customers who will feel that they were tricked or betrayed and not valued by the business. These customers will lose trust in your brand and will results to customer churn.
Some retailers will not even bother to review their return policy if they are achieving their revenue goals. Even if you are able to achieve your revenue goals, just think about the additional revenue you have lost because some of your customers are longer patronizing your store.
Customers would always ask why some retailers keep a strict return policy. The answer to that is because returns are costly. Yes, it is costly, but losing customers can also be more costly for the business. Let’s say a customer you just lost because of your store’s return policy has a Customer Lifetime Value (CLV) of $100,000, then that’s $100,000 lost revenue by just one customer. What if you lose more customers with the same or higher CLV? Now which is more costly? What if the returned item will cost you $5, will you sacrifice a $100,000 CLV?
What do your customers say about your return policy? Are they happy about it? Do they feel that it’s a fair policy? If you have a number of customers who are complaining about your return policy, don’t you think it’s about time you step back and review your return policy?
When customers know that returning an item will not be such a hassle to do, this encourages them to keep on patronizing your store. Of course you wouldn’t want to have customers who will keep on returning items they have purchased from your store without any valid reason especially fraudulent ones, but believe it or not, the number of returns, even fraudulent returns can be reduced if handled wisely and appropriately.
RetailWise USA can work with retailers on their return policies and investigate how they are viewed by the customers. Are your policies beneficial or detrimental to your business.