“Forget sale price. Everything is 100% off when you don’t buy it.” — Joshua Fields Millburn
I have a friend. Let’s call him Jim. Jim has an interesting shopping habit—from time to time, he will buy something at the store and bring it home with a thought in the back of his mind, “If this doesn’t work, I’ll just return it to the store.”
The thinking is simple and, on the surface, appears to make perfect sense: Because the store has a return policy, this purchase has no risk. If it doesn’t fit or match or work for any reason, I can return it to the store. It’s an easy choice… and a perfect win-win situation for me.
Jim’s thinking is not unique. In fact, we all have friends who act like Jim. And, if we are honest with ourselves, most of us are guilty of similar thinking. My fictional friend, Jim, represents all of us—or, at least, Jim represents the 91% of us who say a store’s refund policy is factored in their purchasing decision.
There is, of course, fallacy to this thinking. It is not entirely a win-win situation for the consumer. Jim is not considering the time, energy, and gas needed to return the item if so decided. And he is not considering that returning this item will require him to re-enter the very store that persuaded him to buy something he didn’t need in the first place.
In fact, when you do a little research on the matter, you will discover that refund policies are not a win-win situation for the consumer… just the opposite, they are win-win situations for the seller.
It shouldn’t surprise us that a store or brand would implement specific strategies to get us to part with our money—that is their job after all.
On a macro-level, society pulls us towards consumeristic pursuits. And on a micro-level, sellers utilize strategies to convince us to consume in the specific ways that benefit them most. In my new book, The More of Less, I outline many of the specific tactics that retail stores use to convince us to buy more than we need.
Return policies are certainly one of them. I think it is important for us to be reminded that these policies are established to help, primarily, the store make money.
The prevailing question retailers ask when establishing their refund policy is “What policy results in the greatest profit for our business?” Source: Entrepreneur, The Wall Street Journal, TIME, The New York Times, and the list continues.
But this was never more evident than in an article published this week in the Washington Post titled, “The Surprising Psychology of Shoppers and Return Policies.” The piece outlines a study conducted by the University of Texas-Dallas that seeks to get a “better handle on how return policies affect shopper behavior.”
The results are interesting and important for us (as consumers) to consider. Here is a summary:
When it comes to purchasing, a lenient return policy results in an increase in initial purchases. The length of time allowed to return an item, the reimbursement percentage, the requirements for the return (necessary receipts, for example), the scope, and the specific exchange (store credit vs. money) were all factors considered important by a consumer. We consciously and subconsciously consider each of them when deciding whether to make a purchase or not. As would be expected, the more lenient the policy, the more likely a customer will walk out of the store with an item in hand.
But what is most fascinating about the study is not that it confirms what we know to be true, but that it shines a light on unexpected tendencies when it comes to returning items.
The researchers discovered something unexpected about consumers’ return habits: “More leniency on time limits is associated with a reduction—not an increase—in returns.”
In other words, the longer a time frame allowed to return an item for full refund, the less likely consumers were to return the item in question. The very characteristic that makes the return policy appear to be a major-win for the consumer is actually a major-win for the seller.
How could this be? Wouldn’t the opposite be true? Apparently not.
The more time a shopper is allowed to keep an item before returning it, the more likely they are to just keep the item.
The researchers attempt to explain their finding in a number of ways: the longer a customer has a product in their hands, the more attached they feel to it, the long time frame creates less urgency to take back the item, and the longer consumers hold on to an item, the more likely they are to find a use for it.
What appears to be a win for the consumer is actually a win for the store.
Can refund policies by useful to the consumer? Absolutely, we’ve all found benefit in them at one point or another.
However, are these return policies implemented entirely for the sake of the customer? Absolutely not. They are designed to result in higher sales and lower returns for the stores that implement them.
The very perk that Jim believes is designed to benefit him is actually designed to benefit the store that now has his money.
The return policy at REI (the outdoor co-op) up until 2014 was that co-op members could return any item for any reason at any time for the life of the product. That definitely helped me allow the purchase of items I did not really need for a much higher price than other brick and mortar as well as online retailers sold them. Part of the reason was, “well, I can always return it at any time if I do not like it.” Now, REI has changed that policy partially because people were returning items years later (availing themselves of that return policy). The guarantee is now only valid for one year. This change has really helped me see that I was purchasing fun items I did not need based on a flawed sense of safety. I did not return any items anyways, so why buy at a higher price, or at all. I still have outdoor-based hobbies, but I am careful to purchase the quality item I really need, at a price that fits our family budget, and leave the fun stuff that likely sat in my garage on the shelf.
I have a friend that does that. Makes returns all the time and considers the store credit to be free money. She will say that she bought something else and it only cost her x amount of money. I try to tell her no – she paid the original cost of the returned item plus the x amount. It doesn’t seem to register.
Back in my early consumer driven days, I used to purchase sale items on a credit card thinking I had just “saved” so much money.
Luckily, I figured out that the interest wiped out the savings.
I stopped carrying any balances decades ago, and now on rare occasions that I purchase something, the credit card pays me cash back. I stay away from stores and temptation and consciously remind myself that I don’t want to donate any more unused items.
I find the marketing and strategies of stores fascinating. Though this comment isn’t focused on returns there is suggestive selling everywhere. I have come to the realization that store clerks often don’t even realize what they are saying due to the desensitization of repetition.
Here is my example. I grocery shop at Safeway. Every time I pay for my groceries I am told you saved $XX.XX amount today! Case in point… I always kindly tell the store clerk while smiling so as not to offend.. Wow! Well… not really because I just spent $XXX.XX!!!
It’s hilarious because I usually confuse the clerk for a moment. The truth is there was no savings at all. Its a deceptive tactic to make a customer “feel good” that they “saved” at said store. I always find this scenario ridiculous. It overlaps at most retailers too I’ve noticed.
It’s not that I mind spending the money, after all I need to eat and clothe myself. BUT please don’t tell me what I fantastically and untruthfully saved in the process!! Ridiculous to say the least.
Kohl’s even circles the “savings”, heehee. I just say thank you and carry on. We all know the drill….
Working for three years as an assistant to a professional stylist I’ve seen how return policies can benefit the consumer, but you have to actually return. Stylists need high end, up to the minute fashions for photo shoots, commercial shoots and film shoots, but don’t want to maintain the inventory and usually aren’t reimbursed the full cost of the clothes/props/miscellany needed for the shoot. I used to make returns of around $3,000 in goods daily, and some days as much as $10,000. When your job revolves around returns, it very much inures you to making purchases and very much prepares you for returns. Since starting this job, I’ll do a $2.51 return at Target and walk out of the store without a purchase.
Mirrors in many stores are designed to make you look thinner and the clothes more flattering. I’m always prepared to, and always do, return clothes that don’t look good in my own mirror. I decide as soon as I get home if something doesn’t work and needs to be returned. It goes right back into the bag with the receipt. I’m more careful and usually don’t buy if there is a no return policy or it’s just for store credit.
Sarah Edmiston says
This article really proves the science behind being minimalist. The stores really know what to do to make money off the consumer, and with this knowledge, we can all start to shop a little smarter when we have to.
Jen @ Frugal Millennial says
I completely agree! My mom has struggled with a shopping addiction in the past. She would always tell herself that if something didn’t work out, she would return it. As a kid, I would get so frustrated shopping with her because we ALWAYS had to buy something, even if we didn’t find anything we liked. If she decided she “needed” a new pair of pants, she would buy pants even if she couldn’t find any she really liked. And then she would never wear them, which is a poor financial choice and it’s completely wasteful.
Those Minimalism guys are capitalists. I listened to a podcast in which they were defending capitalism and said the only “bad” capitalism was “crony” capitalism. Clearly lacking class analysis or any understanding of Marxism or scientific explanations of capitalism.
I don’t mind when the minimalists keep it personal, like “don’t go shopping, save 100%,” or “purge all your stuff to feel better” or whatever, but when they go rogue with their unscientific and non-evidence-based political “theories,” they only reveal their crass opportunism.
The cognitive dissonance one must balance in order to support an unsustainable and bankrupt system like capitalism and be a minimalist at the same time while espousing sustainability must be tough. How the bourgeois apologists square that in their minds is anybody’s guess.