10 Tips for Crafting an Effective Return Policy (and Enforcing It)

How to develop a policy that keeps customers happy, protects your business and reduces fraud.
An efficient, convenient return policy is important for building good customer relations. (Photo: returnpolicy/Shutterstock)

Shopkeepers hope their customers love every purchase they make. But sometimes a defective item, a product that doesn’t live up to expectations or a holiday gift that didn’t go over well will be brought back to the store. How you handle those returns matters.

“Research says the return policy is an important part of whether shoppers will come to your store again,” said consumer psychologist Bruce Sanders, author of “Sell Well: What Really Moves Your Shoppers.”

“Returns are an area where you can earn such goodwill, if the return process is smooth,” Sanders said. “The consumer feels so good when they walk in and get their money back or a merchandise credit. Look at each return as a selling opportunity.”

Here’s how to create a return policy that fits your customers’ needs — and yours.

1. Consider who your customers are

The profile of your clientele should be at the root of your return policy, said Sanders.

“How price sensitive are they? If you’re accepting returns you’re not able to sell, you’ll need to raise profit margins a bit to compensate for that. You’ll need to set a more restrictive return policy for price-sensitive shoppers.”

Lenient return policies work well for a base of customers who are honest and not as concerned about pricing. Stores that suffer from a lot of theft or wardrobing (when a customer returns an item after wearing it) will need a stricter policy to avoid fraudulent returns, said Sanders.

“For the small retailer these things become more of a problem because they have limited inventory and they don’t have the clout with their suppliers to return goods,” Sanders said. “So the condition is that I have to be able to resell it.”

If you’re seeing a lot of “serial wardrobers,” you’ll want to require clothing to have tags when returned and be unworn.

If people are coming to your business to try to return goods without a receipt for cash (a tip-off the goods may have been shoplifted), it’s time to require receipts for all returns.

2. Put it in writing

“When a customer comes in to make a return, in many cases they are not aware of restrictions on returns,” said Sanders. He recommends putting your return policy on a small sign near the register, where you and the customer can look at it during the return transaction.

“Then you’re not glaring at each other, you’re looking at something that seems more objective. When a person is surprised about a part of the policy, you take out the sign and point out the part that applies.”

3. Accept returns you can resell

You should always accept returns of products that were defective at the time of purchase, of course. Beyond that, retailers are obligated to accept returns only of items they can resell.

Tech gadgets, high-fashion apparel and holiday items have especially short shelf lives, so you might choose to accept returns from those categories only for a few weeks after the date of purchase, said Sanders.

If a customer is bringing back an unused product that can be put back on the shelf of your store, there’s no reason to deny the return, said Sanders. “I’m a fan of allowing people six months into it to bring their item back.”

4. Keep it mostly consistent

Once you’ve developed your return policy, strive to keep it the same for all customers. “It should be consistent across the board. If you’re going to make exceptions, they should be codified.”

For example, a hardware store may have a different return policy for contractors than for regular retail customers because they make extremely large purchases. This should be specified on your policy, said Sanders.

While consistency is ideal, there will be times you need to adjust the policy for a special circumstance or important customer.

“Empower your staff to make fuzzy return decisions,” said Sanders. “When an exception is made, be sure the staff member talks it over with the owner or manager and use it as a learning experience. If there are lots of exceptions, you’ll want to revisit the return policy to address potential changes.”

5. Avoid saying no

The word “no” should almost never be uttered by the staff at a retail store, said Sanders. Rather than declining a refund, staff can offer an exchange for a similar item as a way of keeping the transaction affirmative.

“Say yes as much as you can when a customer comes in and wants to make a return.”

Be flexible with the return policy when it’s appropriate. If a customer leaves your store disappointed, she will be less inclined to make a future purchase or say something positive about the shopping experience to her friends.

“You have to protect against theft and fraud, but it’s better to loosen the return policy than to lose a customer.”

6. Offer store credit

While you should allow for refunds in the original form of payment, try offering it as a store credit first. This keeps the money in your store and encourages the customer to shop there again, said Sanders.

“When person has a gift certificate or store credit and starts looking around the store, it’s like found money. They may discover things in your store that they didn’t know you had.”

If the shopper balks at receiving store credit instead of a credit card refund or cash, honor the request right away. “Use the words ‘right now.’ Say ‘I’ll refund your card right now.’ At no point did you use the word no.”

7. Keep explanations brief

Some salespeople will feel defensive when a customer wants to bring an item back, said Sanders. “The salesperson looks like they’re taking it personally. They quote the return policy in overabundant detail and get flustered.”

This interaction could be a negative experience for the customer. Train staff to keep explanations brief and point to specific areas of the policy when necessary, said Sanders. When in doubt, tell staff to refer disgruntled shoppers to a manager, who has more power in adjusting policies.

8. Reduce the need for returns

The majority of returns occur when a customer has post-purchase doubts, said Sanders. Retailers who give each sale closure will make the purchase seem final and reduce the likelihood of the item coming back.

“Give sounds of confirmation when a transaction progresses, or a nod or thank you, something to indicate that transaction is coming to a close. You can also clap your hands once after a sale or fold the bag over in a way that’s visible to customer.” These clues will finalize the purchase in a shopper’s mind and make it feel like the product belongs to them.

9. Ask why it didn’t work out

Process returns swiftly, but take a moment to inquire why the purchase didn’t work out, said Sanders. “Don’t make it an inquisition,” said Sanders. “Instead, phrase it as a service-oriented inquiry. Let customers know you want to deal with suppliers that will provide you with reliable products the first time.”

Asking why a customer no longer wants an item will also reduce the chances of fraudulent returns. “The dishonest customers will take their business elsewhere.”

10. Stay service-oriented

Any interaction with a customer, including a return, is a chance to make a future sale, said Sanders. Use the exchange as a way to continue to present top-notch service to customers. Once they trust your policies and products, they’ll be more likely to make additional purchases.

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