The researchers tracked shopper interactions at a pair of online retailers instituting a policy of free return shipping. Following such a return, the average customer spent much more money with that retailer. The increases ranged from 158% to 457%. At least more than doubled, and at the maximum, more than quadrupled the sales revenue! But when customers had to pay for shipping items back, the post-return spending with that retailer dropped at least 75%, on average.
In these studies, there was no relationship between the customer’s opinion of who was to blame for the return and the effects on post-return spending. This is why the researchers recommend retailers implement a no-hassle return policy. I recommend the same for in-store returns.
Still, what about fraudulent returns? You don’t want people purchasing merchandise from your store having the intent in advance of using the items and then making a return with a demand for a full refund or credit. Consumer behavior researchers at Northern Illinois University, University of Tampa, and University of Texas-Tyler call it URD for “unethical retail disposition.”
These researchers were struck by the large number of excuses people give themselves to justify the practice and by the fragility of the reasons people give themselves for restraining from serial returning. A significant percentage of shoppers can be easily convinced to do it and experience little, if any, guilt.
The research findings also led to suggestions for you to reduce the extent of URD:
- Be a part of the community in which you do business. This is more challenging for solely ecommerce retailers and large retail chains than for the locally-based store. But it can be done by all retailers, and it’s important. URD is more common when shoppers consider the retailer to be an outsider. Rates were especially high at stores owned and operated by members of ethnic minorities selling to members of another ethnic minority in a community in which the owner/operator did not themselves live.
- Explain pricing and merchandising decisions to customers. The Illinois/Tampa/Texas researchers believe that at the base of URD is mistrust of the retailer’s intentions in pricing and merchandising.
Run a Store, Not a Public Library
I think you gave short shrift to the URD story... and that retailers need as much help as is possible to reduce these returns. I understand why you would have linked hassle free returns and fraudulent returns but I think removing barriers to the sale and making it risk free is a totally different topic than fraudulent returns like 'buying for the party.'
ReplyDeleteThere must be a better way of dealing with URD than just being part of the community. It is a serious and growing problem and I feel you could address it better.
Yep, Peter, "short shrift" is the downside of my commitment to keep each of my posts to no more than 400 words in order to honor the short reading time I can expect each day from a busy retailer.
ReplyDeleteThe "Run a Store, Not a Public Library" post I link to in today's post includes an additional idea my clients have found useful: When someone makes a return, ask them to tell you the reasons, and then record those reasons along with the person's identification information.
That post also includes, in the comments, the "risk reversal" techniques you were generous enough to share.
There's research evidence that attribute-specific guarantees are better than unconditional guarantees (see http://rimtailing.blogspot.com/2012/10/serve-yourself-to-sst-guarantees.html). But I still believe that, with the limited exception of thieves, it's better to keep a customer than to keep to a policy.
I'm grateful for your opinion and welcome more.