If Christmas is the season of giving, then post-Christmas is the season of returning as unwanted presents return to whence they came. That gets us two interesting stories on how retailers are managing returns. The first is from the Wall Street Journal and deals with how traditional retailers have begun to offer more generous returns policies (Retailers Loosen Up on Returns, Dec 27).
Best Buy Co. this month became the latest large chain to loosen its return policy when it eliminated a 15% “restocking fee” on electronics that had stirred a storm of opposition from consumers on Twitter and Facebook.
Macy’s Inc., Toys “R” Us Inc. and OfficeMax Inc., among others, also have relaxed return policies from last year, said Edgar Dworsky, founder of Consumerworld.org, which has conducted an annual survey of retail return policies for the past seven years.
Some research suggests that in the effort to crack down on consumers who make habitual returns, companies risk harming their reputations with other potential customers.
The impetus for these changes has been pressure from Internet-based retailers. Zappos et al. of necessity have to be open to returns since customers cannot easily evaluate goods before buying but they then set the standard for what constitutes a “reasonable” return policy. What these changes point out is that buying goods are usually bundled with an option to return the item. Customers will accept an “all sales are final” policy if the price is significantly lower but will whine about partial restrictions (such as Best Buy’s restocking fee) when they are not explicitly paired with cost savings.
The second article is from the Washington Post and suggest that Amazon has some ideas on how nip returns in the bud (Amazon patents procedure to let recipients avoid undesirable gifts, Dec 27).
Amazon is working on a solution that could revolutionize digital gift buying. The online retailer has quietly patented a way for people to return gifts before they receive them, and the patent documents even mention poor Aunt Mildred. Amazon’s innovation, not ready for this Christmas season, includes an option to “Convert all gifts from Aunt Mildred,” the patent says. “For example, the user may specify such a rule because the user believes that this potential sender has different tastes than the user.” In other words, the consumer could keep an online list of lousy gift-givers whose choices would be vetted before anything ships.
The patent also allows user to ban classes of gifts (e.g., no sweaters or no Lady Gaga CDs) and provides the option of automatically sending the gift giver a thank you note for the item that was never received.
This is a clever idea that clearly highlights the tension between operational efficiency and social convention. The efficiency comes from avoiding having to ship and return an item the recipient never wanted.
On the back end, retailers are trying to reduce shipping costs by using the less expensive U.S. Postal Service for at least part of the return journey. The Postal Service has partnered with its competitor, Federal Express, on a program called SmartPost, which consolidates individual packages into larger shipments.
“Any time you have to touch a product, there’s a cost associated with that, and those costs add up,” said Kevin Brown, marketing director for Newgistics, a Texas company that specializes in simplifying returns for e-retailers.
But it’s not just shipping costs that e-retailers struggle with on returns. There are labor costs, too. Brown said each return typically results in about two phone calls to customer service lines. Also, returns require processing at distribution centers, which means extra staffing during the holiday season. And many opened products can’t be returned to manufacturers and must be sold at a loss as refurbished items.
“This is absolutely a huge business problem,” said Howe, the Yankee analyst.
I would expect that Amazon would also use this to get more customers to create on-line wish lists since it would be easy to set a rule to auto-return an item not on one’s wish list. That would create even more stickiness to Amazon’s site and drive further sales.
So preempting returns can be both beneficial to both Amazon and the recipient but it explicitly limits the flexibility/creativity of the gift giver. I gave my niece and nephews Nerf guns this year — simply a brilliant gift that I knew with confidence they would enjoy. Just as a I knew with certainty my sister would never get them for children. I ordered them from Amazon and would venture that Sister wishes she could have intercepted them. That’s where operational efficiency smashes into social convention. Yes, this program would be good for Amazon but it requires users to be, frankly, kinda rude. If Amazon really brings this service to market, I suspect it will be a lot like, say, Zillowing your co-worker’s house — lots of people will use it even if they never admit as much in public.