How To Design A Return Policy

Return policies are offered by retailers to help reduce customer risk and act as an incentive for product purchase. Post purchase, if the consumer changes their mind, then the product goes back, the cost for which is often borne by the retailer. Anecdotal evidence suggests that return rates in excess of 20% can be enough to wipe out a retailer’s operating profit, which makes retailers cautious about offering a lenient return policy to help stimulate customer demand. In fact, retailers often choose to offer return policies with checks and balances, ones that include some lenient terms but with restrictions as well. However, increasing purchases via a more lenient return policy does lead to higher returns, and the exact impact depends on the policy. Some aspects of a return policy affect purchases more than returns, while others affect returns more than purchases. Read more at Harvard Business Review.