Return Policies and Building Customer Loyalty

After a recent visit to a higher end, locally owned clothing store in Calgary I was reminded about the impact a retailers return policy could have on customer loyalty.  You see, this particular store only accepted returns on unworn merchandise within 15 days of purchase. Also, they only gave out store credit.

I understand the unworn part when dealing with clothing (definitely a “sanitation” thing in play here). Where I stumble is the 15 day restriction and also the store credit.

This is what made me think about retail return policies in general, including those on eCommerce stores.

Everyone in the eCommerce space knows the story of Zappos and their stellar return policy. Zappos figured out that the customer / retailer balance has shifted in the last few years. With the reach of social media and customer interaction in general, retailers have to be ever more creative in fostering customer loyalty.

Which brings me back to return policies.

I come from a retail family. We’ve spent the last 40 years in the retail space actually. One of my parents and grandparents greatest fears with having liberal return policies was the worry that customers would take advantage of the policy. “Trying instead of buying” or “we aren’t a rental store” were the common theme in these discussions.

Based on the success of eCommerce vendors and their free returns within long terms, I think it’s safe to say that customers really aren’t that abusive.

Don’t get me wrong, there are a few caveats to consider here. The first is margins. If your product margins are priced so thin, free returns and long return terms are probably not going to work. The second is knowing your space and the customers in your space. If the % of returns in your space is abnormally high then you may want to express caution with overly liberal return policies.

For the rest of you, stop it with the forced customer loyalty that is “store credit”. Give the customers the option if you must, but don’t force them to pick something else. And especially don’t force them to have store credit that expires in some short amount of time. Give them at least 6 months.

We have seen clients of ours create some really fun and unique return promotions and incentive offers that have worked brilliantly at re-converting returners into buyers. I’ll save that for another post though!