Woman filling out a return form next to a package with clothes and shoes on top
Photo: Canva

You know why retailers’ efforts to reduce returns have been backfiring, but what about brands that have been making returns even easier and more accessible for customers?

These retailers are making a good name for themselves at a time when the e-commerce experience is more than just competitive prices and fast shipping. The buying experience is no longer stopping after customers click “buy now.”

“Today’s consumer mindset has changed,” stated Forbes. “Services like Amazon Prime have set the bar at a higher level, with speedy delivery, low prices, a vast selection and hassle-free returns.”

With many companies trying to dissuade returns, the retailers that are doing the opposite stand a good chance of not only retaining their customers but attracting new ones.

It’s true that it can be costly to offer free returns “with no strings attached,” but according to Shippo’s latest Returns Report, 96% of customers are “more likely to purchase if free returns are on the table.” Shippo, a leading shipping platform for growing e-commerce businesses, added in its 2023 Benchmarks Report that the solution is to find a middle ground “that makes customers feel they’re being treated fairly and keeps them coming back to your business.”

For example, companies may:

  • Provide incentives to switch customers’ returns to exchanges, such as with an extra $10 to shop with.
  • Analyze their data to see if there’s anything they can do to improve the customer experience, such as by extending return windows.
  • Give customers their money back and tell them to keep or donate the product rather than return it.

This last tactic, in particular, is becoming a popular trend in retail, and it’s because many stores are already stuck with too much inventory, so returns just add to the products they need to deal with.

According to Business Insider, “Walmart, Target, and Amazon are some of the major retailers offering so-called returnless refunds.” It doesn’t always financially make sense for these large retailers to process returns, so this can save everyone time and money. “We’re not talking about free TVs and computers — the policy is applied in situations where the product is unlikely to be resold and where the cost of processing is equal to or greater than the cost of the product itself. It’s intended for lower-cost items, and reserved for customers with purchase history at a given retailer.”

Chewy is another retailer that has picked up this trend. “One woman in Philadelphia told the Journal in 2021 that she attempted to return a too-small cat harness to Chewy, which told her to donate the harness instead of sending it back — and replaced it with one in the correct size.”

By coming up with creative solutions like this, brands may not always be able to lower the number of returns they experience, but they can help increase the likelihood of customers returning to shop with them again. Shippo noted that “91% of consumers say that the overall ease of their returns experience impacts their willingness to shop with a retailer again, and existing customers spend 67% more than new customers.”

BrainTrust

“The key is to not focus on managing returns but rather on making sure the customer is happy with their ultimate experience with the product.”

DeAnn Campbell

Head of Retail Insights, AAG Consulting Group


“I don’t know that consumers necessarily expect to not have to give back an item, but they certainly expect to not have to pay to do so…”

Melissa Minkow

Director, Retail Strategy, CI&T


“Leverage technology where you can with RFID for drop and go returns and User Generated Content (UGC) to help sizing, and always accept returns with a smile.”

Ken Morris

Managing Partner Cambridge Retail Advisors

Discussion Questions

DISCUSSION QUESTIONS: Which industries or types of products do you think would benefit most from a returnless refund policy? How else can retailers strike a good balance between accommodating customers and managing returns?

Poll

Do you believe that offering free returns with no strings attached is a successful strategy for retailers that want to retain customers?

View Results

Loading ... Loading …

Leave a Reply

21 responses to “Could More Returns Lead To More Customer Retention?”

  1. Gene Detroyer Avatar
    Gene Detroyer

    Here we go again. Returns! Who are they a problem for? Not Amazon. Not ZAPPOS. Walmart? Target?

    My colleagues have heard it from me many times. We don’t deal with any online retailers that don’t make it clear that returns are free and easy.

    Can someone tell me what is wrong with the ZAPPOS business model? If I order multiple pairs of shoes, intending to keep one, what is the chance I keep two or three? Who wins, then? ZAPPOS wins if I keep just one. They win big if I keep two or three.

    Several times I have experienced returnless refunds with Amazon. They were usually small, inexpensive products. I assure you Amazon knows what they are doing. Do all returns that go back to a store go back on the shelf, or do some of them ultimately end up in the trash? Why doesn’t the store say, “Just keep it and donate it. Let’s get the one that is right for you.”

    1. DeAnn Campbell Avatar
      DeAnn Campbell

      Nothing wrong with Zappos business model, but their net profits were only hitting 30% of goals at the time of their sale to Amazon, and their return rates were at 35%. I do think DTC across the industry is starting to figure out how to better manage the impact of home delivery and returns, but most online sales still see a 10X factor smaller profit margin than their brick and mortar counterparts.

  2. Bob Amster Avatar
    Bob Amster

    Over the long term, “hassle-free” returns will cease to exist. Suggesting that it will add to a retailer’s customer base is akin to the much older retail adage that “…we lose a penny on everyone we sell, but we make it up in volume.” As they say in Texas, “that dog won’t hunt.”

  3. Ken Morris Avatar
    Ken Morris

    Whatever retail segment you are in you need to follow the 80/20 rule where 20% of your customers generate 80% of the sales, it is imperative to make a return a good customer experience. It’s that golden 20% who might stop shopping with you when they have a bad return experience. Leverage technology where you can with RFID for drop and go returns and User Generated Content (UGC) to help sizing, and always accept returns with a smile.

    1. Brad Halverson Avatar
      Brad Halverson

      100% Ken. As a former grocer, we’d pay careful attention to this 20%. Because they’d not only generate 80% of our sales, but also, at the end of the day about 80% of our annual profit. Grocery shopping is a multiple day per week activity, and so maintaining volume (including hassle free returns) is critical if you want to keep or grow marketshare.

  4. Melissa Minkow Avatar
    Melissa Minkow

    “Good” return policies are definitely a reason consumers would keep coming back to a brand- it’s a convenience perk and it indulges price-sensitivity. I don’t know that consumers necessarily expect to not have to give back an item, but they certainly expect to not have to pay to do so, and they hope to not have to jump through a bunch of hoops along the way. Categories where items are particularly bulky are most ideal for returnless rules, but they also tend to be more expensive, so I’m not sure that’s often feasible for the retailer.

  5. DeAnn Campbell Avatar
    DeAnn Campbell

    The key is to not focus on managing returns but rather on making sure the customer is happy with their ultimate experience with the product. That shirt you never wear because it doesn’t fit or feel right reduces the odds on loyalty and future purchases significantly. But at the same time, having an easy way to drop off the return rather than ship back for free is an important way for retailers to reduce losses from returns. If the experience is pleasant and easy, and there is some kind of benefit to the shopper like faster return credit or a future discount, then free shipping is not as important as some retailers believe.

    1. Gene Detroyer Avatar
      Gene Detroyer

      Yes, the key is to not focus on managing returns but rather on making sure the customer is happy with their ultimate experience with the product. Too often we seem to punish the customer for the return. The less satisfaction starts with retailers with regard to product, the performance of the item, or sizing.

      Why do customers bracket sizes? Because they have no idea what size they will get.

      1. Natalie Walkley Avatar
        Natalie Walkley

        Yes! With machine learning, retailers could flag orders that appear to be bracketed, and provide a real-time sizing chart or size recommendations based on previous returns data. This is one creative way to mirror an in store experience in the digital realm.

      2. Brad Halverson Avatar
        Brad Halverson

        Just saw this happen last week in my household and many other friends homes in my neighborhood. Amazon boxes arriving with dresses, tops and boots of assorted sizes to try on for Taylor Swift concerts. The amount of returns was high. But how is a customer supposed to make a good decision if they can’t trust a clothing manufacturer or retailer on sizing?

      3. Lisa Taylor Avatar
        Lisa Taylor

        Exactly. Retailers need to understand the “root cause” of this behavior. Consumers are buying a product to fill a need. If the information and tools provided for them to understand if the product is right for them is lacking or unclear, they will buy multiples (crossing their fingers), buy a product with the hope that it’s right for them, or they will go to another retailer who can help them understand. Retailers need to decide what drives more value for their business – helping the customer get what they need the first time (and actually build loyalty because the customer appreciates the retailer for their assistance whether it’s through AI, clear, relatable descriptions, trusted reviews, video chat, etc.) or is it returns?

    2. Steve Montgomery Avatar
      Steve Montgomery

      Well said. My Only Cavceat Is retailers should be aware that their will be some that abuse the return process and be prepared on how they will handle that issue.

  6. Mark Schwans Avatar
    Mark Schwans

    Returns provide the best insights into your products and services. It’s a question of whether you are listening and will you act.

    Why are they returning the merchandise? What can you change so the next customer doesn’t return it? Where did the breakdown occur? What can be done better next time? How is it different by product? How can you positively nudge the customer’s behavior for future actions? What can change about the product or how it was sold?

    If you love your customers, you “make it right.” You can do this if you understand customers’ purchasing behavior and the reasons for the return, which will eliminate faulty products and services and reduce returns.

    1. Gene Detroyer Avatar
      Gene Detroyer

      Mark, you nailed it. There are extraordinary messages in returns.

  7. Natalie Walkley Avatar
    Natalie Walkley

    As consumer expectations and supply chain costs ebb and flow— this will continue to be a balancing act for brands and retailers. A binary focus on either cutting costs or driving loyalty won’t solve the complexity of this dilemma. The most innovative retailers are solving the problem with personalized approaches like providing some “free” returns options and some paid, offering certain return methods to specific segments, and having a menu of options to choose from. So, yes, with the right mindset and technology — retailers can strike a balance between accommodating customers and managing returns.

  8. Brian Numainville Avatar
    Brian Numainville

    While there is certainly a blend of balancing the costs of free returns with satisfying the customer, I’ll come down on the side of making the customer happy every time. With all of the data that many organizations collect, I’d think a real time AI assessment of each customer tells them quite a bit about the degree to which a customer is more or less valuable. But in the end, even not so good customers talk to other people. If there aren’t free returns and an easy process, I won’t buy in the first place.

  9. Craig Sundstrom Avatar
    Craig Sundstrom

    Give customers their money back and tell them to keep or donate the product rather than return it. Uhmmm…
    Perhaps it’s the finance guy in me, or natural conservatism, but this strikes me as playing with fire. Oh, I understand the thinking, but it still seems like famous last words (before a company goes out of business).
    The essence of any successful return policy is having consistent return/refund rates, and – of course – still being able to offer competitive prices with those levels. In short, it’s very much a “numbers” issue; a blind fixation on something like “(building) trust and loyalty” without a clear understanding of the costs isn’t going to work.

  10. Brad Halverson Avatar
    Brad Halverson

    A continued discussion here on RetailWire, writer Alicia captures why it’s important to make returns hassle free, because customers do look long-term in their shopping habits. Retailers who make their life easy will get a chunk of future sales and loyalty to go with it. Nordstrom, Bombas, Costco, Target, Amazon are all good examples.

    Until clothing manufacturers and retail stores fix sizing inconsistencies, create standards, and focus on personalization/modeling, this industry will get hammered with constant returns. But this industry also has the most financial incentive to close the loop. Until then, returnless refund policies will lead the day.

  11. Michael Zakkour Avatar
    Michael Zakkour

    Returns are a major costs and drag on margin/profitability. For everyone, including Amazon, Zappos, Walmart, Target. My recommendations to my clients and to whoever is reading this remains the same. Keep allowing free returns, but:

    -Use channels and tools that have lower return rates than .com or marketplaces
    -Rethink your supply chain, logistics and fulfillment strategy, operations and vendors to reduce the cost of returns
    -Use a combination of the services out there that reduce the cost of returns (e.g. Happy Returns, they use a drop off at 5,000 locations system and then ship returns back to merchants in bulk cutting 20% 40% of the cost of returns
    -Merchandise and sell in ways that decrease incidences of returns
    -Set up a system that shuts down serial returners who are abusing the system

  12. Rachelle King Avatar
    Rachelle King

    This is a no-brainer. Frictionless returns are becoming table sstakes for demanding consumers. This is going to push retail in general to reimagine the real cost of returns. Considering it’s more expensive to acquire a new customer than to retain an existing customers, it’s time to think differently about the long term impact of retail return policies.

  13. Scott Jennings Avatar
    Scott Jennings

    Focus on the customer experience first to understand why returns are occurring. Take that knowledge & embed it in your organization to deflect future returns. I worked with a a large retailer that started selling big screen tv’s as a new category, & they were inundated with returns right out of the gate. It wasn’t until they looked at their data & surveyed their employees when they figured out most customers were struggling with how to turn on the TV’s they were selling. A little bit of coaching for front line workers, call center, & additional information for the customers solved the return problem. Always better to deflect returns before they happen.

21 Comments
oldest
newest
Gene Detroyer
Gene Detroyer
15 days ago

Here we go again. Returns! Who are they a problem for? Not Amazon. Not ZAPPOS. Walmart? Target?

My colleagues have heard it from me many times. We don’t deal with any online retailers that don’t make it clear that returns are free and easy.

Can someone tell me what is wrong with the ZAPPOS business model? If I order multiple pairs of shoes, intending to keep one, what is the chance I keep two or three? Who wins, then? ZAPPOS wins if I keep just one. They win big if I keep two or three.

Several times I have experienced returnless refunds with Amazon. They were usually small, inexpensive products. I assure you Amazon knows what they are doing. Do all returns that go back to a store go back on the shelf, or do some of them ultimately end up in the trash? Why doesn’t the store say, “Just keep it and donate it. Let’s get the one that is right for you.”

DeAnn Campbell
DeAnn Campbell
  Gene Detroyer
15 days ago

Nothing wrong with Zappos business model, but their net profits were only hitting 30% of goals at the time of their sale to Amazon, and their return rates were at 35%. I do think DTC across the industry is starting to figure out how to better manage the impact of home delivery and returns, but most online sales still see a 10X factor smaller profit margin than their brick and mortar counterparts.

Bob Amster
Bob Amster
15 days ago

Over the long term, “hassle-free” returns will cease to exist. Suggesting that it will add to a retailer’s customer base is akin to the much older retail adage that “…we lose a penny on everyone we sell, but we make it up in volume.” As they say in Texas, “that dog won’t hunt.”

Ken Morris
Ken Morris
15 days ago

Whatever retail segment you are in you need to follow the 80/20 rule where 20% of your customers generate 80% of the sales, it is imperative to make a return a good customer experience. It’s that golden 20% who might stop shopping with you when they have a bad return experience. Leverage technology where you can with RFID for drop and go returns and User Generated Content (UGC) to help sizing, and always accept returns with a smile.

Brad Halverson
Brad Halverson
  Ken Morris
15 days ago

100% Ken. As a former grocer, we’d pay careful attention to this 20%. Because they’d not only generate 80% of our sales, but also, at the end of the day about 80% of our annual profit. Grocery shopping is a multiple day per week activity, and so maintaining volume (including hassle free returns) is critical if you want to keep or grow marketshare.

Melissa Minkow
Melissa Minkow
15 days ago

“Good” return policies are definitely a reason consumers would keep coming back to a brand- it’s a convenience perk and it indulges price-sensitivity. I don’t know that consumers necessarily expect to not have to give back an item, but they certainly expect to not have to pay to do so, and they hope to not have to jump through a bunch of hoops along the way. Categories where items are particularly bulky are most ideal for returnless rules, but they also tend to be more expensive, so I’m not sure that’s often feasible for the retailer.

DeAnn Campbell
DeAnn Campbell
15 days ago

The key is to not focus on managing returns but rather on making sure the customer is happy with their ultimate experience with the product. That shirt you never wear because it doesn’t fit or feel right reduces the odds on loyalty and future purchases significantly. But at the same time, having an easy way to drop off the return rather than ship back for free is an important way for retailers to reduce losses from returns. If the experience is pleasant and easy, and there is some kind of benefit to the shopper like faster return credit or a future discount, then free shipping is not as important as some retailers believe.

Gene Detroyer
Gene Detroyer
  DeAnn Campbell
15 days ago

Yes, the key is to not focus on managing returns but rather on making sure the customer is happy with their ultimate experience with the product. Too often we seem to punish the customer for the return. The less satisfaction starts with retailers with regard to product, the performance of the item, or sizing.

Why do customers bracket sizes? Because they have no idea what size they will get.

Natalie Walkley
Natalie Walkley
  Gene Detroyer
15 days ago

Yes! With machine learning, retailers could flag orders that appear to be bracketed, and provide a real-time sizing chart or size recommendations based on previous returns data. This is one creative way to mirror an in store experience in the digital realm.

Brad Halverson
Brad Halverson
  Gene Detroyer
15 days ago

Just saw this happen last week in my household and many other friends homes in my neighborhood. Amazon boxes arriving with dresses, tops and boots of assorted sizes to try on for Taylor Swift concerts. The amount of returns was high. But how is a customer supposed to make a good decision if they can’t trust a clothing manufacturer or retailer on sizing?

Lisa Taylor
Lisa Taylor
  Brad Halverson
15 days ago

Exactly. Retailers need to understand the “root cause” of this behavior. Consumers are buying a product to fill a need. If the information and tools provided for them to understand if the product is right for them is lacking or unclear, they will buy multiples (crossing their fingers), buy a product with the hope that it’s right for them, or they will go to another retailer who can help them understand. Retailers need to decide what drives more value for their business – helping the customer get what they need the first time (and actually build loyalty because the customer appreciates the retailer for their assistance whether it’s through AI, clear, relatable descriptions, trusted reviews, video chat, etc.) or is it returns?

Steve Montgomery
Steve Montgomery
  DeAnn Campbell
15 days ago

Well said. My Only Cavceat Is retailers should be aware that their will be some that abuse the return process and be prepared on how they will handle that issue.

Mark Schwans
Mark Schwans
15 days ago

Returns provide the best insights into your products and services. It’s a question of whether you are listening and will you act.

Why are they returning the merchandise? What can you change so the next customer doesn’t return it? Where did the breakdown occur? What can be done better next time? How is it different by product? How can you positively nudge the customer’s behavior for future actions? What can change about the product or how it was sold?

If you love your customers, you “make it right.” You can do this if you understand customers’ purchasing behavior and the reasons for the return, which will eliminate faulty products and services and reduce returns.

Gene Detroyer
Gene Detroyer
  Mark Schwans
15 days ago

Mark, you nailed it. There are extraordinary messages in returns.

Natalie Walkley
Natalie Walkley
15 days ago

As consumer expectations and supply chain costs ebb and flow— this will continue to be a balancing act for brands and retailers. A binary focus on either cutting costs or driving loyalty won’t solve the complexity of this dilemma. The most innovative retailers are solving the problem with personalized approaches like providing some “free” returns options and some paid, offering certain return methods to specific segments, and having a menu of options to choose from. So, yes, with the right mindset and technology — retailers can strike a balance between accommodating customers and managing returns.

Brian Numainville
Brian Numainville
15 days ago

While there is certainly a blend of balancing the costs of free returns with satisfying the customer, I’ll come down on the side of making the customer happy every time. With all of the data that many organizations collect, I’d think a real time AI assessment of each customer tells them quite a bit about the degree to which a customer is more or less valuable. But in the end, even not so good customers talk to other people. If there aren’t free returns and an easy process, I won’t buy in the first place.

Craig Sundstrom
Craig Sundstrom
15 days ago

Give customers their money back and tell them to keep or donate the product rather than return it. Uhmmm…
Perhaps it’s the finance guy in me, or natural conservatism, but this strikes me as playing with fire. Oh, I understand the thinking, but it still seems like famous last words (before a company goes out of business).
The essence of any successful return policy is having consistent return/refund rates, and – of course – still being able to offer competitive prices with those levels. In short, it’s very much a “numbers” issue; a blind fixation on something like “(building) trust and loyalty” without a clear understanding of the costs isn’t going to work.

Brad Halverson
Brad Halverson
15 days ago

A continued discussion here on RetailWire, writer Alicia captures why it’s important to make returns hassle free, because customers do look long-term in their shopping habits. Retailers who make their life easy will get a chunk of future sales and loyalty to go with it. Nordstrom, Bombas, Costco, Target, Amazon are all good examples.

Until clothing manufacturers and retail stores fix sizing inconsistencies, create standards, and focus on personalization/modeling, this industry will get hammered with constant returns. But this industry also has the most financial incentive to close the loop. Until then, returnless refund policies will lead the day.

Michael Zakkour
Michael Zakkour
15 days ago

Returns are a major costs and drag on margin/profitability. For everyone, including Amazon, Zappos, Walmart, Target. My recommendations to my clients and to whoever is reading this remains the same. Keep allowing free returns, but:

-Use channels and tools that have lower return rates than .com or marketplaces
-Rethink your supply chain, logistics and fulfillment strategy, operations and vendors to reduce the cost of returns
-Use a combination of the services out there that reduce the cost of returns (e.g. Happy Returns, they use a drop off at 5,000 locations system and then ship returns back to merchants in bulk cutting 20% 40% of the cost of returns
-Merchandise and sell in ways that decrease incidences of returns
-Set up a system that shuts down serial returners who are abusing the system

Rachelle King
Rachelle King
15 days ago

This is a no-brainer. Frictionless returns are becoming table sstakes for demanding consumers. This is going to push retail in general to reimagine the real cost of returns. Considering it’s more expensive to acquire a new customer than to retain an existing customers, it’s time to think differently about the long term impact of retail return policies.

Scott Jennings
Scott Jennings
9 days ago

Focus on the customer experience first to understand why returns are occurring. Take that knowledge & embed it in your organization to deflect future returns. I worked with a a large retailer that started selling big screen tv’s as a new category, & they were inundated with returns right out of the gate. It wasn’t until they looked at their data & surveyed their employees when they figured out most customers were struggling with how to turn on the TV’s they were selling. A little bit of coaching for front line workers, call center, & additional information for the customers solved the return problem. Always better to deflect returns before they happen.