Omnichannel retailers in heated competition with Amazon have loosened many of the traditional restrictions on product returns, from time limits to requiring reasons (e.g. damaged or defective items) for the return. But these retailers may not have reckoned with the true costs of instituting such ultra-liberal returns policies. The New York Times recently spotlighted the impact of unexpected returns on the paychecks of commission-based store associates, while MarketWatch discussed the negative effects of easy returns for online purchases on the entire retail organization, calling them a major contributor to the “ghost economy.”
This week the RTP editorial team discusses whether the returns policy pendulum has swung too far, or whether the current situation needs to remain just a cost of doing business in the age of Amazon – and if so, what retailers can do to mitigate the worst of the impacts.
Debbie Hauss, Editor-in-Chief: I have always admired Nordstrom for its liberal return policy. I am sure the retailer’s executives know there will be some abuse but they have accepted that as a trade off for the customer service. But faced with return fraud of up to $16 billion per year in the U.S., according to the National Retail Federation, many retailers feel like they need to fight back or literally lose their shirt. For example, some retailers implemented dress tags that are attached to the outside of the dresses in an obvious place, to avoid having a shopper wear it to one event then return it immediately after. But taking the return out of the store associate’s pay is just not right, unless the retailer can prove the associate was involved in the scam. A partial answer could be the implementation of more video technology or other analytics solutions that track individual store associates’ and shoppers’ return rates. I don’t envy retailers in the position of having to balance satisfied customers with return losses.
Advertisement
Adam Blair, Executive Editor: It’s quite understandable that brick-and-mortar retailers feel the need to keep up with the e-Commerce Joneses, particularly Amazon, with extremely liberal return policies. Customers, also understandably, love that many of the previous economic “penalties” for returns have disappeared. Since retail industry experts have been preaching for years about the importance of putting the customer at the center of retail decision-making, it’s hard to argue against such moves. But that doesn’t mean retailers should simply ignore the costs of such policies, both to their organizations and their commissioned employees. The New York Times talks not just about the actual hit to commission-based employees’ paychecks but the uncertainty that makes it harder for them to plan their budgets, while the MarketWatch report notes the impact of heavy returns on margins and operational elements such as in-stock levels. At the very least, retailers should absorb some of the “hit” to employee paychecks from product returns, particularly those that take place after a pre-determined period (e.g. 60 or 90 days). And clever retailers should figure out ways to discourage customers from abusing returns policies. They will need to walk a fine line to do so without angering shoppers, but it may well be worth the effort.
David DeZuzio, Managing Editor: There is no question retailers must play keep-up with Amazon and implementing a customer-centric returns policy is one of the quickest ways to endear your brand to shoppers. However, having commission-based employees take the hit on returned products, especially items that have been more than slightly used is not fair to those employees. Not long ago, there were numerous restrictions on returns. As a consumer, I would never return an item after using 90% of it. That’s not fair to anyone involved. As retail evolves, it should come down to this: Commission-based employees are selling products in good faith. If the retailer wants to accept the fact that some shoppers are going to abuse the returns policy they should absorb the cost as part of doing business. Don’t penalize your workers because some customers are gaming the system.
Glenn Taylor, Associate Editor: The story of a Macy’s salesperson having to give up commission on a returned perfume bottle that was almost empty shows that retailers are now set up between a rock and a hard place, as they try to discover ways to minimize returns. Retailers often implement these policies as a means to ensure associates aren’t selling items that they know will be returned later on. The MarketWatch report noted that of the $642.6 billion tallied in worldwide returns in 2015, only $28 billion came from return fraud while more than $220 billion came from poor product quality or incorrect sizing. To me, this indicates that while fraud continues to be a cumbersome piece of the returns puzzle, there are still greater issues at hand, particularly based on the actual service being provided to the consumer.
I can see why individual retailers would feel better about their own policies from a monetary standpoint if they didn’t have to deal with flexible returns policies, but with Amazon continuing to lead the way in this department, these brands can’t exactly afford to turn consumers away even after the purchase is made.
Klaudia Tirico, Associate Editor: I was a sales associate at a big department store when I was in college, and let me tell you, the Macy’s sales associate who had to accept an almost-empty bottle of perfume is not even the worst example of people taking advantage of a lenient return policy. While I was only a part-time associate who didn’t make commission, there were many other associates who did have to worry about losing their commission because women would buy very expensive clothes and return them — so obviously worn and washed numerous times — after a season. There has to be a way for retailers to compete with Amazon and not put their employees at risk of losing their hard-earned money. Just because Amazon’s policy is lenient, doesn’t mean all retailers’ have to be. This is where brick-and-mortars with good omnichannel strategies win over Amazon. Offer in-store returns for items purchased online after a month or so, or make it easy to return items via mail by supplying return postage. I don’t think retailers need to be battling Amazon over every little detail. If your employees are working on commission, then lenient returns isn’t the answer.
