When the value image of the store or merchandise is highly positive, the return policy is a relatively minor consideration in shoppers’ purchase decisions. In those circumstances, enforcing a stringent policy lets you reduce costs of checking returned items for defects, damage, or usage and then disposing of them. Such costs are especially high from fraudulent returns, which are more likely with merchandise of high quality or fashion.
In these studies, the signals of high value which reduced sensitivity to return policies came from highly positive user ratings. A deep discount on merchandise also might signal high value. In one of the studies, purchase intentions for a deeply discounted item were actually higher when the return policy was stringent than when it was lenient. The combination of deep discount and tight restrictions seemed to portray high value.
Because item ratings and price discounts will differ among the items in an individual store, the researchers propose that retailers have a tiered set of policies. For instance, you could have a “no returns or exchanges” policy on closeout merchandise being sold at a deep discount; a generous “money back guarantee” policy for items newly introduced to the marketplace, including consumables you can’t restock; and policies of varying strictness in-between. Just be sure details of the policies applying to a specific purchase are apparent to shoppers in easily understandable language both at the time of shopping and the time of any item return.
Take the sales channel into account. Because additional uncertainty often is associated with online transactions, return policies are a more important consideration for shoppers. Online retailers can multiply customer spending by offering to pay for shipping back returned items for whatever reason.
University of Virginia and Washington and Lee University researchers tracked shopper interactions at online retailers instituting a policy of free return shipping. Following such a return, the average customer spent much more money with that retailer. Increases ranged from 158% to 457%. At least more than doubled, and at the maximum more than quadrupled, sales revenue. But when customers had to pay for shipping items back, post-return spending with that retailer dropped at least 75%, on average.
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