Is Charging Customers For Returns Bad Business?

fromWVTF

It's an old saying in retail: "The customer is always right." But many companies that sell online or through catalogs have moved away from that motto — making customers pay to return merchandise. Sellers think it's a fair policy. Consumers don't see it that way, and a new study suggests that firms would be far better off in the long run footing the bill for returns.

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STEVE INSKEEP, HOST:

NPR News business news starts with a shopping bonanza.

(SOUNDBITE OF MUSIC)

INSKEEP: American shoppers turned out in record numbers over the holiday weekend. The National Retail Federation says that since Thursday some 247 million people - that would be most of us - visited brick and mortar stores and retail websites spending more than $59 billion - up 13 percent over last year. And now, with Black Friday and Small Business Saturday behind us, online retailers get to take center stage with Cyber Monday.

Last year saw a record amount of online holiday shopping. And now you study feels that Internet merchants could keep those sales going, year round, by doing one surprisingly simple thing.

Sandy Hausman of member station WVTF explains.

SANDY HAUSMAN, BYLINE: Most companies pay for return shipping only if they made a mistake or if a product is defective, but if the customer doesn't like the purchase, he or she foots the bill. Sellers figure that's fair, but consumers like Elizabeth Mellen, who returns lots of stuff, beg to differ.

ELIZABETH MELLEN: Just because I don't like it, it doesn't fit; it didn't look like it did in the picture. I think that might be a big part of why they should give you free returns.

HAUSMAN: Amanda Bower teaches business at Washington and Lee University. She did the math and decided to stop buying from companies that didn't cover return shipping.

AMANDA BOWER: Paying to ship products to me - seven dollars. Paying seven dollars to have to ship it back, and now I've paid $14, and I've got absolutely nothing to show for it.

HAUSMAN: Bower wondered if costly return policies were ultimately bad for business, so she and a co-author tracked four years of purchases at two major online companies and surveyed thousands of customers.

What they discovered could change the rules of online sales. Buyers who returned merchandise at no charge were far more likely to come back.

BOWER: Those consumers increased their purchases from about 50 percent to about 350 percent, so you were seeing thousands of dollars all because the company had sprung for a $15 return.

HAUSMAN: But when customers had to pay for a return, sales fell sharply. Bower says companies should see free return shipping as an investment that builds trust with customers and pays off with increased long-term sales.

For NPR News, I'm Sandy Hausman.

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