The cost of returns

Janet Babin Dec 4, 2010

The cost of returns

Janet Babin Dec 4, 2010


Tess Vigeland: We asked reporter Janet Babin in New York to look into some of those return policies Professor Fong mentioned, and she joins us now. Hi Janet.

Janet Babin: Hey Tess.

Vigeland: So I know you’re going to talk about specific store policies in your story, but you know it seems to me the retail industry must lose quite a bit of money from all this returning. How does it hurt them?

Babin: Well they do a lot of money, because you figure to get those items back on the shelf, when people are returning goods, you have to employ people. But those people aren’t taking in any more money, they’re just putting stuff back on the shelf that these retailers are going to have to sell again. And a lot of times, they can’t sell it at their store again. So they have to figure out some secondary market to send it to.

I talked to Sarah Loveland about returns at her small business. She co-owns Daddies Board Shop in Portland, Ore. It’s a family-run business and it sells skateboards and snowboards.

Sarah Loveland: It’s really hard on the small business if somebody returns something that I can’t turn around and sell as new.

The board shop only takes back unused gear. But Loveland says that doesn’t stop parents from trying to return their kids’ used skateboards.

Loveland: That kind of disturbs me cause I know that their child knows that they’re lying and they’re trying to essentially shoplift in my definition.

Retailers will lose almost $14 billion dollars this year on returns. That’s up close to a third over 2009. Joseph LaRocca with the National Retail Federation says some stores have installed new policies to curb returns.

Joseph LaRocca: You find many now requiring a receipt. You might find there’s some time limits — 30 days or 60 days. And many retailers now are giving out gift receipts.

Some stores don’t even like to discuss their return policies. They refer customers to the fine print on the receipt.

Saks Fifth Avenue limits returns to within 30 days of purchase. And to be fully credited, a customer must have a receipt. Compare that to Nordstrom’s policy. Here’s Nordstrom spokesman Colin Johnson.

Colin Johnson: We don’t actually have a formal policy regarding returns at Nordstrom. We evaluate each situation on a case-by-case basis.

Babin: How does Nordstrom deal with serial returners?

Johnson: We don’t really view it that way. Look, we sincerely hope to provide good service.

Nordstrom does not require a receipt for returns. Nor does Bed, Bath and Beyond. Compare that to electronics chains that require a restocking fee of up to 25 percent.

Instead of tightening returns policies that can turn off consumers, most big retailers have gone high tech: they track every return we make. Jim Bunn with retail consulting firm Clear Thinking Group tells stores to create an in-house database of all customer returns.

Jim Bunn: They’ll look at it in two ways, you have people who are returning a lot, or you have people who are trying to do fraudulent things.

Return rates vary, depending on what you buy. Book publishers have to take back up to 30 percent of their sales. For clothing, the average is between 6 and 8 percent. Retailers can only do so much to contain buyer’s remorse. Bunn recommends that stores offer customers a discount if they buy something else when they come in to make the return.

Bunn: When you come into the store and return something, you can get a coupon for use in the store that day.

That new purchase helps offset losses. But nothing will eliminate returns altogether. Fickle shoppers are just part of the cost of doing business.

In New York, I’m Janet Babin for Marketplace Money.

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