What's the Right Return Policy for Your Business?

May 15, 2015


It’s a feeling that many retailers dread. An unhappy customer stomps into your store and demands a return. Handle the situation wrong and your business could suffer. That’s why you need the right return policy for your business.

In a perfect world, every customer would be 100% satisfied with their purchase and no one would ever want to make a return. Since that world doesn’t exist, the next best thing is to have a return policy that is easy, reasonable and stress-free.

The components

A well-thought out return policy should balance the customer’s need for satisfaction and your bottom line. Lean too far to one side and you’ll find that you are accepting returns on Sony Walkmans™ from 1983. When designing your return policy, keep the following elements in mind:

  • Time period
  • Need for receipt or other proof-of-purchase
  • Need for packaging to be intact
  • Making it easy to return a purchase

Time period

Typical return policies for retail businesses range from 30-90 days, but if your merchandise has stale dates (food), has sanitation concerns (make up), has a seasonality to it (fashion) or is otherwise perishable in some way, you may want to consider a return policy that takes those factors into account. However, some retailers, like Nordstrom and Zappos, have taken a different approach and allow for returns at any time, on any merchandise and without restrictions. They base this decision on the logic that frequent returners are also frequent buyers.

At the other extreme is Forever 21 – a store that sells highly seasonal and trendy clothes for women and men. It may be because of this merchandise mix that they have chosen to adopt an “exchange only” policy of 14 days for in-store purchases. Online purchases may be returned within 30 days. Confusing? It might be to a consumer who purchases from this retailer through both in-store and online channels. Having a clear and straightforward return policy will make the shopping, and returning, experience better for your customers.

Need for receipt or other proof-of-purchase

Requiring a receipt for returns allows you to not only confirm that the product is your merchandise, but it informs you of when the product was purchased and at what price – ideal for merchandise that is regularly discounted. If you sell a unique product or a line that is branded with your identity, like Banana Republic, you may be able to relax this rule. Another way you can help ensure a more hassle-free return experience for your customers is by offering a loyalty card. This card can help keep track of purchases made by credit or debit so your customers don’t need to keep paper receipts on hand

Need for packaging to be intact

Some products will need to be used before the customer knows if they are satisfied or not. This can include things like cosmetics and electronics. It may be perfectly reasonable to ask a customer not to remove the tags on a $500 dress before returning it, but they may have to actually open and use a skin cream to know that it causes them to break out in a rash. It will go a long way with customers to ensure that your return policy is reasonable and in line with the products you sell.

Making it easy to make a purchase

In thinking about the right return policy, you have to also consider how the purchase was made. Some purchases are easy – the dress fits perfectly, the couch is just what you were looking for - but others take a bit more thought and consideration. If customers know that a purchase from your store means the item is theirs forever like it or not, or they will have to jump through hoops to return it, they may think twice before taking that product home. Or, if they do take it home and get frustrated with your return policy, you may find that they resolve their frustrations with a costly, and time-consuming, chargeback. You don’t want to miss out on a sale simply because your customer feels pressured into knowing if the dress matches the shoes in her closet or if the couch will fit down the stairs to the basement.

Getting it right

Some businesses like Zappos, Nordstrom, and Costco, get it and have formulated return policies that work for both them and their customers. Others, like Forever 21, have policies that are overly restrictive which can make customers hesitate before making a purchase. Before formulating your own return policy, take a look at who is doing it right and who is missing the mark. 


This article is for informational purposes only and it is not intended to provide you with any personalized financial, marketing, accounting or tax advice. Neither Moneris Solutions Corporation (Moneris) nor any of its affiliates shall be liable for any direct, indirect, incidental, consequential or punitive damages arising out of use of any of the information contained in this article. Neither Moneris nor any of its affiliates warrant or make any representation regarding the use or the results of the use of the information, content and materials contained in this article in terms of their correctness, accuracy, reliability or otherwise.

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