Retailers adjusting return policies in down economy

November 14, 2008
Written by National Retail Federation
As retailers get a handle on return fraud, many are softening return policies this holiday season as a way to provide good customer service. According to the National Retail Federation’s third annual Return Fraud Survey, completed by 82 retail loss prevention executives last month, more than half of retailers (52%) say their holiday return policies will be more lenient than the policy for the rest of the year, up from 35 percent who said so in 2007.
 
In addition, the number of retailers who said their holiday return policy will loosen compared to last holiday season will triple, from 3.4 per cent of retailers to 11.0 per cent. Common changes may include retailers extending the amount of time for returns to be made and also being more flexible to customers without a receipt. In comparison, 17.1 per cent of retailers said their return policy will tighten this holiday season, up slightly from 15.3 per cent last year. In addition, 71.9 per cent of retailers’ policies will remain the same.
 
“In a year where practicality is paramount, many retailers are making return policies more flexible for customers who need to bring back duplicate or unwanted gifts after the holidays,” said NRF Vice President of Loss Prevention Joe LaRocca. “Retailers seem to be finding a balance between providing good customer service to shoppers while preventing criminals from taking advantage of lenient policies.”
 
The survey also provided more evidence of a weak economy, as retailers said that returns as a percentage of sales are on the rise. This year, return rates are estimated to reach 8.7 per cent of sales, up from 7.3 per cent one year ago. The amount of merchandise returned to stores this year is estimated to reach $219.1 billion, with $47.1 billion of those returns coming from holiday purchases.
 
“Consumers experiencing a bit of buyer’s remorse as a result of the economy may be returning unworn and unused merchandise to stores,” said NRF Vice President of Loss Prevention Joe LaRocca. “While retailers look at returns as a way to provide good customer service, an increased rate of returns is yet another challenge for retailers during a tough economic climate.”
 
Retailers know the decision to make return policies more lenient may come at a cost. According to the survey, return fraud continues to plague the industry and will cost retailers an estimated $3.54 billion this holiday season, down slightly from $3.6 billion last year. (Retailers will lose $11.8 billion to return fraud in 2008.) However, retailers seem to be tackling the problem, as return fraud is expected to decrease to 7.5 per cent of holiday returns from 8.9 per cent last year.
 
Though retailers seem to be confronting return fraud, incidents continue to permeate through most retail stores. According to the survey, most retailers (88.9%) have had stolen merchandise returned to stores within the past year. Retailers also report being victimized by returns of merchandise originally purchased with fraudulent or stolen tender (74.1%) and returns using counterfeit receipts (45.7%).
 
The unethical practice of “wardrobing,” the return of non-defective, used merchandise—especially in the apparel and electronics categories—continues to be problematic for retailers. Nearly two-thirds of retailers (64.2%) have seen this type of merchandise returned in the past year – down from 66.1 per cent last year, but up from 2006 levels (56.0%).

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