Handling returns can pose problems for retailers
AMES — Retailers are facing a dilemma with their return policies as the holiday shopping season is upon us.
Iowa State University assistant professor of supply chain management Robert Overstreet says return policies that are too restrictive can turn off customers. He cites online retailer LL Bean’s decision in 2018 to change the return policy that allowed you to bring something back with or without a receipt.
“They just changed it to one year with a receipt,” he says. “…I think I’m a rational person and that seems fair — but they received quite a backlash for that decision.” Overstreet says LL Bean made the change after they found some people were taking advantage of the policy.
“What had happened is people would go to thrift stores and find things and return for it for credit. Or dumpster dive. One article said people were dumpster diving, ” he says. Overstreet says increased costs and supply chain backups now have focused attention again on return policies.
“Things flow really well out toward the customer. I mean, we in supply chain, we’re really good at that. But trying to get stuff back into the supply chain is harder, it’s more expensive,” he says, “we don’t know what’s coming back, we don’t know what shape it’s in, we don’t know if it can be resold.” Overstreet says some companies figure in the cost of returns in their sales — but many can’t.
He says some retailers have decided to deal with it in another way. “I was just reading an article recently where companies are just not even taking the material back, just giving the person a refund, and allowing them to keep the material because it’s just cheaper to do that and then take it back into the system,” Overstreet says.
He says has says having overly lenient return policies in an effort to get customers can backfire. “What it did is it took all of the burden of the purchase decision away from the consumer and place it on the retailer because he made a bad choice, you didn’t have to pay for that,” Overstreet says.
He thinks such policies will be an incentive to people who already are abusing the system. “And I think what’s going to happen with those we allow you to keep the item even though you’re using it have used it may actually continue to use it but you’re claiming you want to return it that’s going to create a whole new issue and people act in bad faith and says ‘I’ll just keep it for free, tell them I want to return it. I’m just gonna keep it anyway,” he says.
The National Retail Federation says if consumer habits mirror previous years, 20 to 30% of the merchandise they buy this holiday season will be returned.