Generous ‘returns’ policies will hit online retailers this Christmas

According to the study published in the peer-reviewed Journal of Business Research, if consumer habits mirror previous years, 20% to 30% of the merchandise bought during the pre-Christmas buying frenzies will be returned for a full refund.

This, of course, is a big financial hit and logistical challenge for retailers, which also have to cover all the shipping, sorting and processing involved.

“Supply chain managers are really good at moving things to the customer. They’re not as good at bringing things back in because it’s a jumbled, disorganised flow back into the company for a product that they may not be able to resell,” said Robert Overstreet, Assistant Professor of Supply Chain Management at the university.

Stricter policies are being adopted

To slow the backward flow and offset costs, retailers are increasingly adopting stricter return policies. Some are shortening the return window; others are adding processing fees or scrapping free shipping altogether.

The risk with this approach, Overstreet says, is backlash from customers. He points to L.L. Bean as an example. The US-based clothing and outdoor recreation equipment company was, in 2017, ranked 16th in RepTrack’s 100 Most Reputable Companies. But the next year it substantially amended it returns and replacement guarantee, and thereafter dropped out of the Top 100 listing completely.

Overstreet and his co-authors say in the newly published study that consumers are more likely to shop elsewhere if they view a return policy change as unfair or breaking a promise. They’re also more likely to complain to friends and family. 

But retailers may be able to retain customers and protect their reputations if they specifically target so-called ‘serial returners’ with the policy change. Serial returners include people who order multiple sizes, colours or models of a product – then choose one and send the rest back. Last year, a study found that more than half of online shoppers in the US buy more than they intend to keep. 

Another shopping behaviour that’s contributed to the growth in returns is known as ‘wardrobing’ or’ retail borrowing’. Someone buys something for short-term or one-off use and then sends it back to the retailer before the returns deadline expires.

“With higher costs this year and increasing volumes of excess inventory, many retail giants are considering revamping their return policies,” said Overstreet. “Change is coming. But how they implement and communicate those changes will matter.”

Read more about the study here.