Transparency Key for Return Policy Changes, Study Finds

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Retailers risk backlash over stricter return policies
Retailers risk backlash over stricter return policies. Haslam College of Business research reveals that explaining changes reduces negative reactions

Merchandise returns have become a significant issue for retailers, with the 2024 holiday season alone accounting for an estimated US$160bn in returns.

It forms part of a broader trend, as returns from all purchases in 2024 totalled between US$685bn and US$890bn, or roughly 13.2% to 17% of sales. Compounding the problem, return fraud accounted for at least US$28bn last year.

In response to these rising costs, retailers have implemented stricter return policies. According to a 2023 survey by Happy Returns, 81% of retailers have introduced measures such as restocking fees, shorter return windows and shipping fees.

L.L. Bean's policy change sparks debate

A pivotal conversation about return policies occurred in 2018 when L.L. Bean revised its famous lifetime return policy to one year, requiring proof of purchase. The change provoked widespread criticism, lawsuits and customer backlash.

The event inspired Dr Huseyn Abdulla, assistant professor at the University of Tennessee, Knoxville's Haslam College of Business, to investigate how retailers can better manage such policy changes.

Dr. Huseyn Abdulla, assistant professor at the University of Tennessee, Knoxville's Haslam College of Business

"The general sentiment in the media was that if you change the policy silently, many people who don't return items or care about policies won't notice," Dr Huseyn explains.

"That motivated us to study this question, because you can't say what would have happened if L.L. Bean didn't communicate this decision and provide a rationale."

The impact of transparency on customer trust

Dr Huseyn's research team conducted experiments with 1,500 US consumers to explore the issue.

Participants were asked to imagine being loyal customers of a fictional retailer that imposed return restrictions, such as restocking fees and shorter return periods.

The study revealed that customers reacted negatively to policy changes, even if they rarely used the return service. However, customers who received an explanation for the changes were significantly less upset.

Dr Huseyn contends that, when merchants fail to explain restrictions, they surrender control of the narrative, allowing those outside their organisations to create explanations that often take the form of negative speculation.

Communicating the 'why' reduces adverse reactions

Dr Huseyn highlights that honesty and transparency are crucial for mitigating customer dissatisfaction.

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"Be open; be direct to your customers that you need to change this policy because it's no longer financially sustainable for you," he continues. "Use those narratives to justify your actions. Do not let your customers find answers elsewhere."

Research shows that when retailers communicate these reasons, customers are more likely to understand and accept changes.

Conversely, failing to explain leaves room for damaging rumours and speculation, as seen on platforms like Reddit.

Lessons for other industries

The study's findings extend beyond retail. For example, airlines and credit card companies similarly tighten loyalty and benefits policies, prompting customer pushback. 

Dr Huseyn believes his research could offer insights for these industries.

"How customers react to those policy changes in other industries will be a natural follow-up for this study," he says. "I expect that there will be similar reactions there that parallel with retailer return policy changes."

Retailers can learn from Dr Huseyn's research by proactively addressing customer concerns when implementing policy changes, fostering transparency and trust while maintaining customer loyalty and safeguarding their reputations.


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