Use a Lenient Return Policy to Boost Sales

Ironically, one way to increase sales in your store is to have a lenient return policy. Big-box stores have figured it out. They’ve made it easy to return almost any item, sometimes even without a receipt. Retailers with lenient return policies are aware that shoppers want the comfort of knowing it will be easy to return an item, even if they never do. And when they do return an item, they usually continue to shop at the store.

A recent study conducted by the University of Texas–Dallas came to a similar conclusion – that lenient return policies can actually increase sales – and then tried to quantify the critical factors that determine the best return policy.

The study, recently published in the Journal of Retailing, examined existing studies on return policies to find patterns in consumers’ purchase and return behaviors. Overall, lenient return policies positively affect a customer’s decision to purchase and return. Not all return policies are created equal, however, and there are several critical factors that will determine if your return policy will have a positive or negative impact on sales.

The study by the University of Texas–Dallas suggests five factors to manipulate to create the best policy.

• The most lenient return policies have a wide range of items that are acceptable to return. The best way to limit returns it to limit the scope, but this policy will not help increase sales, as customers may be less willing to take a chance to purchase an item. Home improvement retailers may want to impose some limit on their return policies to prevent use-and-return fraud. Limiting returns on larger items like snowblowers and lawnmowers is not unusual. However, it is important to clearly state which items are not eligible for return. The receipt should clearly show those items. If a customer does try to return one of those items, staff handling the return should be prepared to explain why a return is not possible.
• While it may seem counterintuitive, one of the best ways to limit returns, the study found, was to allow a longer amount of time to make the return. One possible explanation is that if customers know they have a longer time to make the return, they’re likely to wait to make the return. The longer they possess the product, the more likely they are to become attached to it and keep it.
• Lenient return policies allow for a full refund of the price. This type of policy can actually increase sales since shoppers know they can always get their money back. They’re more likely to shop your store and buy items they won’t return.
• Retailers with the best return policies take the hassle out of returning product. Low-effort returns also increase sales and create more loyal customers. In fact, a complex return policy can damage a store’s customer service image because it can make the return process a negative experience for the customer, and the customer may hesitate to come back. The best return policies give the customer the benefit of the doubt.
• The most lenient return policies offer cash refunds on returned items. While offering a product exchange or store credit for returns may assure you still get a sale, you convey a greater sense of trust towards the customer, and thereby increase customer loyalty, by offering a cash refund.

Of course, as you adjust these five factors to mold your own return policy, you must consider your bottom line and the goal of your return policy. If you want to stimulate more purchases while being willing to take the chance that some of those purchases might be returned, then a lenient policy is the best policy.