November 14, 2008
Retailers Looking at Record Number of Returns
Buyer remorse, wardrobing, criminal activity and a number of other factors
will result in consumers returning a record $219 billion in merchandise
this year, according to a new survey released by the National Retail Federation
(NRF).
According to the NRF,
merchandise returns will account for 8.7 percent of total sales in 2008
compared to 7.3 percent last year.
Fashion retailers are
particularly susceptible to buyer remorse syndrome, according to Marshall
Cohen, chief industry analyst for The NPD Group. "Fashion
is a feel-good purchase that sometimes doesn’t feel so good once you get
it home, and that’s what makes it so vulnerable," he told The New
York Times.
Howard Davidowitz,
chairman of Davidowitz & Associates, said,
"Consumers are trading down massively; they are out of money, and that’s
where returns come in. When times are terrible, they look for ways to cut
back."
Candace Corlett,
a partner in WSL Strategic Retail, said that items in the past that weren’t
worn may have stayed in the closet but now they’re being returned.
"Returns are the newfound cash, the new savings account," she told
the Times. "Everything you take back, you are presumably putting
in your piggy bank."
Of
course, dollars going back into consumers’ piggy banks are flowing directly
from retailers’ coffers. Even with that, 52 percent of retailers told the
NRF their return policies will be more lenient this year than last.
"In
a year where practicality is paramount, many retailers are making return
policies more flexible for customers who need to bring back duplicate or
unwanted gifts after the holidays," Joe LaRocca,
vice president of loss prevention for the NRF, said in a press release. "Retailers
seem to be finding a balance between providing good customer service to
shoppers while preventing criminals from taking advantage of lenient policies."
Discussion Question:
What will record product returns mean for retailers and for customer
service? Do you recommend different policies for different product categories,
e.g. apparel vs. electronics?
BrainTrust
Recent Discussions
Discussion Questions
Poll
It’s great to see that many of the panelists who have commented today view the current economic environment as an “opportunity” for growth and enlightenment in retail customer service training and performance, and in customer education. I agree. I also believe this is a perfect opportunity for retailers to think through, and to implement permanent (not just seasonal) changes in their return policies that may be more pertinent to the realities of the 21st century marketplace. These realities obviously include serious merchandise return fraud enabled by employees (both sales floor and backroom and their friends and families), and outright shoplifting by “customers.”
Tightening their policies related to “tagless” and/or “non-receipted” merchandise accepted for return is a good place for retailers to start and the vast majority of the customers you truly want as patrons have no problem with this and understand the logic of it.
Offering fair time frames and maintaining generous return/exchange practices for adequately documented gifts and mis-buys are where stores must be most flexible in order to retain good will. If Mr. Retailer started playing holiday music and urged customers to buy Christmas gifts in October and November–then in order to be considered reputable, Mr. Retailer is going to have to allow not days, but months, to make exchanges and returns to gifts that were not actually opened until Dec. 25.
I read this timely quote from Malcolm Gladwell early today; “When it’s easy to make money, you have no incentive to think about development of talent. Now, you’re forced to.” Think about the impact this pending increase in returns will have on front line staff and management and look at all the areas they need to be trained on. Proper selling techniques, to begin with, so that the customer gets the right solution, not just another product. Then, strategies to convert the refund customer into a paying one. Not to mention skills on how to deal with difficult situations when the return does happen.
Consider this for yourself when you’re a customer buying anything, or for that matter, returning it later. The impact of the staff on your shopping experience is immense.
Retailers would be well advised to invest more than ever in developing their talent.
Record numbers of returns may strain customer service for some retailers. Retailers with great everyday customer service like Nordstrom and Costco will probably handle returns as “business as usual.”
Retailers should have reasonable return policies throughout the year, not just at the holidays. It’s fine to have different policies for different categories, as long as the policies are clearly stated at the time of purchase. It’s also fine to offer store credit for items returned without receipts.
Consumers and retailers will be stressed beyond normal this holiday season. Healthy respect for each other and great customer service, including a friendly, but realistic return policy, will help everyone have a better holiday.
If the Christmas sales dwindle down to a precious few, and if returns mount higher than Everest, December will be dismal and January will be depressing for retailers. The best policies for this season’s sales and returns have now been transcended and converted into prayers. What is needed is a Christmas miracle.
I recently put up a BrainTrust query about this and it was interesting to see the responses. Retailers will have to do a thorough job of ‘educating’ their customers on return policies. But we need to look at the return transaction as another opportunity to provide sterling customer service. Here is a chance for the store to turn that refund into a sale. Even if you can only convert 1 out of 10 returns into sales, I say go for it! Returns associates need a better understanding of their function in a retail company. It’s not just about running transactions through a till. It’s about providing outstanding service and upselling or cross-selling during a return is the best way to reduce return dollars.
Fashion (and most retail categories) has limitless possibilities when it comes to upselling returns. Putting your grumpiest associate on the returns desk will not do you any favors nor discourage returns.
An interesting stat I encountered in the toy industry: stores with lower mystery shop scores had higher return percentages than stores with higher mystery shop scores. Service is the be all, end all for us in retail.
Returns eat profits in the short term, and cost the consumer in the mid and long-term. They result in increased damaged and handling costs, as well as mismanagement of inventory. Unfortunately, returns are a fact of retail. The key is to manage these returns at store level (i.e. mark them down) so that they are handled less and damaged less.
Personal Shopper (continued): This is an appropriate time for another update from the personal shopper at a very, very, high end department store in NYC. (Annual client spending $50,000 to $250,000 in this store alone) I first reported several months ago that for the first time the personal shopper experienced customers asking the price but still buying the products. Recently, I noted that customers were bringing items back and experiencing needing a second or third run-through of credit cards to get an approval. Within the last week, this retailer let go half of their personal shoppers. It is an ugly season.
These times will separate the strong from the weak. Those retailers that do business as if they were going to be around tomorrow will be around tomorrow. Those retailers that are counting every penny in their December till as a final sale will experience finality in their business.
A reasonable return policy makes customers in two ways. In a gift giving season, the purchaser is often concerned if they are buying the right color or model or gift for someone. There is doubt in the shoppers’ mind. If the retailer can take away some of that doubt, it will help the shopper make the purchase. And chances are that purchase will never come back. A similar vignette in a store with a difficult return policy may end with the retailer losing the initial sale entirely.
Retailers must understand the return tail. Often times the return of one item leads to the purchase of another, if not on the initial shopping trip, then on a following. Retailers must consider that a trip to the store to return an item is a trip to the store.
I live about 4 blocks from one of the most famous watch stores in the world. About 7 or 8 years ago I bought my son a very nice watch for a celebratory gift. It turned out that it wasn’t the perfect model for him. He told me what he would prefer and I went back to the store to return it. The new watch cost about $10 less than the one I had originally bought. So I had a credit for about $10. They would not give me a credit on my AMEX, they would only give me a store credit. I said, there is nothing in this store that sells anything close to $10, and I asked them to credit the credit card I used to buy the original watch. I asked to speak to a supervisor and eventually a store manager, to no avail. It wasn’t the $10 that was a big deal, it was the principle of the issue. In the end, I never used the store credit and I won’t ever go back to the store.
There is no doubt this will be a difficult season and returns will be high, but the winners will be the retailers whose customers feel a positive connection when they walk out of the store after a hassle free return.
Several years ago, I watched as the clerk at the service desk accepted a return and gave the customer full retail value on several units of the same item. This customer had been doing the same thing week after week, returning sale items from the previous week without a receipt to receive store credits at full retail. The clerk turned to me and asked “What can I do?” “We’ve been told to accept all returns.” I also remember reading about the “Nordstrom’s Letter.” Apparently even Nordstrom will eventually send customers who consistently return merchandise a note to indicate it will no longer be accepted.
I can’t recall the last time I returned something, so I personally don’t have a lot of experience with the policies but it seems to me that this economy can only increase the volume of returns and that even regular customers are going to be tempted to push the rules. Because I don’t return a lot of stuff, I resent my fellow consumers who increase the retailer’s operating costs (and therefore the margin required to make a profit). It is a shame that retailers have to take an aggressive stance to prevent being taken advantage of by a few unscrupulous customers.
With that thought in mind, I would like to hear of retailers who have a well implemented return policy that allows them to verify purchases and minimize restocking costs. I have absolutely no problem with a policy that puts a time limit on returns and that rejects shoes or clothing that have obviously been worn. Who wants customers that would try to return inappropriate items anyway? I think returns will increase even more over the holidays as gift recipients convert frivolous gifts into things they really need. To continue supporting fraudulent returns will only exasperate the problem.
Put a bunch of retailers in a room and get them talking, and the subject of holiday returns is bound to come up.
Shoppers are cutting back on indulgences for themselves, and are concentrating on the basics. This leads retailers to wonder whether they will return holiday gifts like sweaters and CDs, and use the money for groceries instead.
Despite the expected rise in returns, retailers know that they’ll want to charm every customer. The recession will be over at some point, and those folks will return to shopping with a vengeance.
Retailers can look at this situation several ways, most of which will not help build their business or pull them through this time of economic uncertainty. Most consumers are not crooks, so don’t treat every consumer as if they are a crook. That said, the return process can be stressful for consumers and they aren’t being paid to handle the stress. A retailer can use this opportunity for one-on-one interface to build customer relations and win life-long customers, and also create some great “word of mouth” advertising.
Retailers must first of all make their return policy clear – print it on the back of every receipt, post it on the wall beside the exit signs and next to the service counter. Utilize your POS system to help consumers. Example, was a receipt lost. You can use your POS system (if it’s set up right) to verify a purchase.
Whatever you do, if you can’t help a customer make a return, then print up some instructions on how to sell an item on Craigs list and/or ebay. By all means be helpful even if you can’t provide a refund. Make this as pleasant an experience for consumers as possible. Every one at your service counter is a media channel, they can broadcast your praises or they can do the opposite. You have some control here, use it wisely.
Retailers are right to be flexible with returns. Increased customer service will have customers returning when they truly need something or when times get better. I’m sure it’s hard to keep returns flexible when sales are so poor for retailers, but customers will return to companies they feel are easy to deal with. Also, returns often lead to more sales because the customer is back in the store.
More Discussions
As Boomers ‘Age Out of Peak Purchasing,’ How Can National Brands Retain Interest With Gen Z?
According to a recent First Insight study titled “Is Gen Z Still Choosing Your Brand,” while…Is Supply Chain Volatility Here To Stay?
Can we expect an ongoing volatility to remain in terms of retail supply chain?Has Same-Day Delivery Become an Expectation Across Retail?
Are expectations around retail delivery speed in flux?
It’s great to see that many of the panelists who have commented today view the current economic environment as an “opportunity” for growth and enlightenment in retail customer service training and performance, and in customer education. I agree. I also believe this is a perfect opportunity for retailers to think through, and to implement permanent (not just seasonal) changes in their return policies that may be more pertinent to the realities of the 21st century marketplace. These realities obviously include serious merchandise return fraud enabled by employees (both sales floor and backroom and their friends and families), and outright shoplifting by “customers.”
Tightening their policies related to “tagless” and/or “non-receipted” merchandise accepted for return is a good place for retailers to start and the vast majority of the customers you truly want as patrons have no problem with this and understand the logic of it.
Offering fair time frames and maintaining generous return/exchange practices for adequately documented gifts and mis-buys are where stores must be most flexible in order to retain good will. If Mr. Retailer started playing holiday music and urged customers to buy Christmas gifts in October and November–then in order to be considered reputable, Mr. Retailer is going to have to allow not days, but months, to make exchanges and returns to gifts that were not actually opened until Dec. 25.
I read this timely quote from Malcolm Gladwell early today; “When it’s easy to make money, you have no incentive to think about development of talent. Now, you’re forced to.” Think about the impact this pending increase in returns will have on front line staff and management and look at all the areas they need to be trained on. Proper selling techniques, to begin with, so that the customer gets the right solution, not just another product. Then, strategies to convert the refund customer into a paying one. Not to mention skills on how to deal with difficult situations when the return does happen.
Consider this for yourself when you’re a customer buying anything, or for that matter, returning it later. The impact of the staff on your shopping experience is immense.
Retailers would be well advised to invest more than ever in developing their talent.
Record numbers of returns may strain customer service for some retailers. Retailers with great everyday customer service like Nordstrom and Costco will probably handle returns as “business as usual.”
Retailers should have reasonable return policies throughout the year, not just at the holidays. It’s fine to have different policies for different categories, as long as the policies are clearly stated at the time of purchase. It’s also fine to offer store credit for items returned without receipts.
Consumers and retailers will be stressed beyond normal this holiday season. Healthy respect for each other and great customer service, including a friendly, but realistic return policy, will help everyone have a better holiday.
If the Christmas sales dwindle down to a precious few, and if returns mount higher than Everest, December will be dismal and January will be depressing for retailers. The best policies for this season’s sales and returns have now been transcended and converted into prayers. What is needed is a Christmas miracle.
I recently put up a BrainTrust query about this and it was interesting to see the responses. Retailers will have to do a thorough job of ‘educating’ their customers on return policies. But we need to look at the return transaction as another opportunity to provide sterling customer service. Here is a chance for the store to turn that refund into a sale. Even if you can only convert 1 out of 10 returns into sales, I say go for it! Returns associates need a better understanding of their function in a retail company. It’s not just about running transactions through a till. It’s about providing outstanding service and upselling or cross-selling during a return is the best way to reduce return dollars.
Fashion (and most retail categories) has limitless possibilities when it comes to upselling returns. Putting your grumpiest associate on the returns desk will not do you any favors nor discourage returns.
An interesting stat I encountered in the toy industry: stores with lower mystery shop scores had higher return percentages than stores with higher mystery shop scores. Service is the be all, end all for us in retail.
Returns eat profits in the short term, and cost the consumer in the mid and long-term. They result in increased damaged and handling costs, as well as mismanagement of inventory. Unfortunately, returns are a fact of retail. The key is to manage these returns at store level (i.e. mark them down) so that they are handled less and damaged less.
Personal Shopper (continued): This is an appropriate time for another update from the personal shopper at a very, very, high end department store in NYC. (Annual client spending $50,000 to $250,000 in this store alone) I first reported several months ago that for the first time the personal shopper experienced customers asking the price but still buying the products. Recently, I noted that customers were bringing items back and experiencing needing a second or third run-through of credit cards to get an approval. Within the last week, this retailer let go half of their personal shoppers. It is an ugly season.
These times will separate the strong from the weak. Those retailers that do business as if they were going to be around tomorrow will be around tomorrow. Those retailers that are counting every penny in their December till as a final sale will experience finality in their business.
A reasonable return policy makes customers in two ways. In a gift giving season, the purchaser is often concerned if they are buying the right color or model or gift for someone. There is doubt in the shoppers’ mind. If the retailer can take away some of that doubt, it will help the shopper make the purchase. And chances are that purchase will never come back. A similar vignette in a store with a difficult return policy may end with the retailer losing the initial sale entirely.
Retailers must understand the return tail. Often times the return of one item leads to the purchase of another, if not on the initial shopping trip, then on a following. Retailers must consider that a trip to the store to return an item is a trip to the store.
I live about 4 blocks from one of the most famous watch stores in the world. About 7 or 8 years ago I bought my son a very nice watch for a celebratory gift. It turned out that it wasn’t the perfect model for him. He told me what he would prefer and I went back to the store to return it. The new watch cost about $10 less than the one I had originally bought. So I had a credit for about $10. They would not give me a credit on my AMEX, they would only give me a store credit. I said, there is nothing in this store that sells anything close to $10, and I asked them to credit the credit card I used to buy the original watch. I asked to speak to a supervisor and eventually a store manager, to no avail. It wasn’t the $10 that was a big deal, it was the principle of the issue. In the end, I never used the store credit and I won’t ever go back to the store.
There is no doubt this will be a difficult season and returns will be high, but the winners will be the retailers whose customers feel a positive connection when they walk out of the store after a hassle free return.
Several years ago, I watched as the clerk at the service desk accepted a return and gave the customer full retail value on several units of the same item. This customer had been doing the same thing week after week, returning sale items from the previous week without a receipt to receive store credits at full retail. The clerk turned to me and asked “What can I do?” “We’ve been told to accept all returns.” I also remember reading about the “Nordstrom’s Letter.” Apparently even Nordstrom will eventually send customers who consistently return merchandise a note to indicate it will no longer be accepted.
I can’t recall the last time I returned something, so I personally don’t have a lot of experience with the policies but it seems to me that this economy can only increase the volume of returns and that even regular customers are going to be tempted to push the rules. Because I don’t return a lot of stuff, I resent my fellow consumers who increase the retailer’s operating costs (and therefore the margin required to make a profit). It is a shame that retailers have to take an aggressive stance to prevent being taken advantage of by a few unscrupulous customers.
With that thought in mind, I would like to hear of retailers who have a well implemented return policy that allows them to verify purchases and minimize restocking costs. I have absolutely no problem with a policy that puts a time limit on returns and that rejects shoes or clothing that have obviously been worn. Who wants customers that would try to return inappropriate items anyway? I think returns will increase even more over the holidays as gift recipients convert frivolous gifts into things they really need. To continue supporting fraudulent returns will only exasperate the problem.
Put a bunch of retailers in a room and get them talking, and the subject of holiday returns is bound to come up.
Shoppers are cutting back on indulgences for themselves, and are concentrating on the basics. This leads retailers to wonder whether they will return holiday gifts like sweaters and CDs, and use the money for groceries instead.
Despite the expected rise in returns, retailers know that they’ll want to charm every customer. The recession will be over at some point, and those folks will return to shopping with a vengeance.
Retailers can look at this situation several ways, most of which will not help build their business or pull them through this time of economic uncertainty. Most consumers are not crooks, so don’t treat every consumer as if they are a crook. That said, the return process can be stressful for consumers and they aren’t being paid to handle the stress. A retailer can use this opportunity for one-on-one interface to build customer relations and win life-long customers, and also create some great “word of mouth” advertising.
Retailers must first of all make their return policy clear – print it on the back of every receipt, post it on the wall beside the exit signs and next to the service counter. Utilize your POS system to help consumers. Example, was a receipt lost. You can use your POS system (if it’s set up right) to verify a purchase.
Whatever you do, if you can’t help a customer make a return, then print up some instructions on how to sell an item on Craigs list and/or ebay. By all means be helpful even if you can’t provide a refund. Make this as pleasant an experience for consumers as possible. Every one at your service counter is a media channel, they can broadcast your praises or they can do the opposite. You have some control here, use it wisely.
Retailers are right to be flexible with returns. Increased customer service will have customers returning when they truly need something or when times get better. I’m sure it’s hard to keep returns flexible when sales are so poor for retailers, but customers will return to companies they feel are easy to deal with. Also, returns often lead to more sales because the customer is back in the store.