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January is prime time for returns in the retail industry, the month where shoppers show up in droves to trade in an ill-fitting sweater from grandma or to unload the second and third “Frozen” dolls that showed up under the Christmas tree.
This post-Christmas ritual has always been costly for retailers, comprising a large share of the $284 billion in goods that were returned in 2014. But now it is arguably becoming more urgent for the industry to think carefully about return policies, as analysts say the rise of online shopping is bringing with it a surge in returns. The return rate for the industry overall is about 8 percent, but analysts say that it is likely significantly higher than that online, since shoppers are purchasing goods without seeing them in person or trying them on.
Against that backdrop, researchers at University of Texas-Dallas sought to get a better handle on how return policies affect shopper behavior and, in turn, whether lenient policies such as offering a lengthy period for returns actually helps or hurts a retailer’s business.
Overall, a lenient return policy did indeed correlate with more returns. But, crucially, it was even more strongly correlated with an increase in purchases. In other words, retailers are generally getting a clear sales benefit from giving customers the assurance of a return.
But of course, not all return policies are created equal, and that’s where the findings get interesting. The team examined several potential characteristics of a return policy: Time (such as whether you must return within 14 days or 90 days); money (whether or not you get a full reimbursement); effort (whether you must provide a receipt or other forms); scope (whether even sale merchandise is eligible for return); and exchange (whether you’re limited to getting store credit for your return).
This post-Christmas ritual has always been costly for retailers, comprising a large share of the $284 billion in goods that were returned in 2014. But now it is arguably becoming more urgent for the industry to think carefully about return policies, as analysts say the rise of online shopping is bringing with it a surge in returns. The return rate for the industry overall is about 8 percent, but analysts say that it is likely significantly higher than that online, since shoppers are purchasing goods without seeing them in person or trying them on.
Against that backdrop, researchers at University of Texas-Dallas sought to get a better handle on how return policies affect shopper behavior and, in turn, whether lenient policies such as offering a lengthy period for returns actually helps or hurts a retailer’s business.
Overall, a lenient return policy did indeed correlate with more returns. But, crucially, it was even more strongly correlated with an increase in purchases. In other words, retailers are generally getting a clear sales benefit from giving customers the assurance of a return.
But of course, not all return policies are created equal, and that’s where the findings get interesting. The team examined several potential characteristics of a return policy: Time (such as whether you must return within 14 days or 90 days); money (whether or not you get a full reimbursement); effort (whether you must provide a receipt or other forms); scope (whether even sale merchandise is eligible for return); and exchange (whether you’re limited to getting store credit for your return).
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