Should the return policy be updated?

There is an e-commerce company whose return policy was not very appealing (50% refund or 100% store credit), especially comparing to its competitors, who mainly support a 100% refund.

There are concerns about people abusing the return policy if they open it up to 100% since their margin is already low.

However, there are many customers complains about this return policy.

Should the return policy be updated?

Changing the whole strategy for this customer complain sounds crazy.

At first glance, it looks like it’s a straightforward question if all the competitors can provide the 100% refund, why can’t we do it? Especially, if the direct competitors who share the same price point in the market segment can keep the margin, why can’t we? One straightforward solution is to lower the cost, increase the price or do both to keep the margin and make customers happy. Also, we shouldn’t “punish” the regular customers because there is potentially someone else may abuse the policy.

If we take this solution, it looks like finance team may need to do some calculation to make sure we will have enough margin based on some predictions. Ideally, this return policy update may raise the customer satisfaction, which may result in more customers come to purchase. However, beyond putting on more transactions, there might be more negotiation going on with the vendors, as well as some cost reduction from the internal operation. On the other hand, the price strategy needs to be rethought; potentially, it may change the market segmentation.

For this return policy update, it looks like there will be some strategy changes, maybe HR needs to change high road approach to low road approach by cutting the training fee, or decrease the budget for marketing since potentially more customers will come.

With so many uncertainties and changing strategies from many perspectives, executives will undoubtedly be very hesitated to do it. Plus, it may lead the company in a direction that they don’t want to go, such as converting to a different market segment.

Solve the problem, solve the real one.

However, let’s step back for a minute. Why do customers complaining about the policy?

Let’s say, I bought a bottle of lotion in Sephora but got allergy, so I returned it. Do I prefer the refund to my card or store credit? I’ll take store credit because I know, I am going to get some other product at Sephora, and I will keep coming back to this store since the shopping experience is excellent. Plus usually, it takes a few days to get the money back to my credit card. In this scenario, I don’t care that much if I get 50% of refund or 100%, because I like to understand the store credit better and I know I will use those store credit sooner or later.

Going back to this e-commerce company that sees the return policy issue: if the customer likes the shopping experience here, they will have higher possibilities to accept the store credit. What makes them want to return and don’t want to come back is a bigger question needs to answer. Mainly the whole shopping experience should be improved, and this company should keep doing what they’ve been doing on this topic. Again people don’t want to buy a quarter-inch drill; they want a quarter-inch hole.