Retail sales are big business — over $3.5 trillion last year. Customer returns are big business, too; about $350 billion last year.
About 5 percent of those returns are probably fraudulent, according to current estimates. At over $17 billion it’s big business, also.
Much of that fraud originates by stretching or cheating customer service policies.
As an example, a friend of mine had once worked as a salesman in the men’s clothing section of The Bon Marche, the now-defunct department store which was then, and is in memory still, an icon of downtown shopping in Seattle.
Long before Nordstrom became famous for its story, possibly apocryphal, of accepting a customer’s return of an automobile tire return (Nordstrom doesn’t even sell tires), the Bon had a return policy that was famous among shoppers for its liberal interpretations and customer care.
My friend was working the morning shift one day and a woman shopper came in to return a man’s shirt that she said was a gift and didn’t fit. When looking at the item, though, it was obvious that not only had it be worn, but someone had cut the sleeves with scissors to make a short-sleeved shirt out of it. He told the customer that the store could not accept the return.
The woman became irate and demanded to see the store manager. My friend took the shirt in to his supervisor to explain why he had declined the return. The supervisor nodded, and said, “Give her full credit for it.” In The Bon’s market, the potential negatives outweighed the costs of issuing the credit.
Just recently, the L.L. Bean company received some blowback from its decision to place some limits on its previously open-ended customer-return policy. That policy had no time limits and essentially said that any time a customer became dissatisfied with a product’s performance, that was reason enough to accept the return.
The roots of L.L. Bean’s return policy are found in the company’s history and its customer base.
The company began with a product disaster. Its first, and at that time only, product was a waterproof boot — the “duck boots” still made and sold by the firm. Unfortunately, “waterproof” they were not, due to a manufacturing defect. Over three-quarters of the boots sold were returned by unhappy customers with cold, wet feet. Leon Leonwood Bean knew his customer base and decided to return 100 percent of each customer’s money.
Standing behind a product to that extent raised — actually, created — the company’s reputation in its actual and potential customer base. At that time it consisted mostly of hunters, fishermen, and others who made their living outdoors. It also launched Leon’s practice of personally testing every product the company sold.
There are some valuable lessons in L.L. Bean’s recent experience with its return policy, as well as in the history of policies in other companies such as Nordstrom, REI, and the late Bon Marche.
The first lesson is that, just as with food, presentation is important. L.L .Bean’s changes to its return policy are not unreasonable and it is still very accommodating to customers. Unfortunately, that part was lost in the dust-up over changing the open-ended return and the proof-of-purchase requirement. Those elements unnecessarily dominated the company’s message and could, instead, have been minimized by rethinking and rewriting the message before it went public. If there ever were a time for a focus group, that was it.
The second lesson is: Don’t let your reaction to a few chiselers drive company policy or poison your relationship with your customers. The best companies have the best customer service. Period.
The third lesson is that customer service is an expensive place to find the funds to cover a poor sales year or to underwrite an expansion. L.L. Bean’s sales were flat last year, and they are pursuing a costly, major expansion of their retail store locations. We can only wonder if the need to cut expenses crept into their thinking about product return costs.
L.L.Bean has well-earned excellent reputation with its customers and with the general public, and it is unlikely to suffer any ill effects from its product return policy change. REI, which has a similar customer base, made a similar change to its policy five years ago and while there was a certain nostalgia-based sadness about the change, customers got over it. Even Nordstrom, whose accepting of customer returns is legendary, has had to modify its policy somewhat,; it now uses enhanced customer records to screen out serial or bogus returners.
There is a right, winning return policy to fit every business, and managers can find it by knowing, understanding and respecting its customer base.
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