“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.
Pete Williams says
So true. I do most of my shopping at Costco, which has a generous return policy — and no area to try on clothes. Since I go there on a weekly basis (doing all grocery shopping there) I figure it’s no added hassle. Still, I inevitably wait in more return lines than I otherwise would.
Rea says
I shop at Costco on a weekly basis as well, and I STILL stand there looking at clothing and thinking ‘If I don’t really like this/it doesn’t fit, will I REALLY bother to return it?’ A lot of times the answer is no. As a consequence, I only buy when I love something enough to say ‘yes’, and I end up with pieces that I love and wear all the time instead of pieces that languish in the back of my closet.
Kellen says
Isn’t most everything at Costco wrapped or contained in plastic? Are all those plastics recyclable or does it end up in a landfill? How is it minimalist to continue to generate so much trash?
Jan Ramsey Brick says
Wow – this makes so much sense. I’m really looking forward to your new book Joshua! Thanks for the great info.
Shannon says
Returns have been on my mind lately for a slightly different reason – This Fall we had an experience with an online company where the product received was damaged, nothing serious but some paint was chipped. They were SO fast about sending a new one and told us to keep the first one too. Sounded fantastic until the second one also came with the exact damage (I consider that a design defect now.) They refunded our money quickly and told us to keep BOTH of the lights. My husband and I talked a long time about what sort of business model would need to be in place and finally decided that its high volume, low quality goods that make that make it feasible.
Like you mentioned there were additional costs in there to us that the company in no way absorbed. Our time waiting & getting rid of the second product, the small repairs needed and the lingering feeling of cheapness that hangs on the one we kept.
Then about a month later the paper ran a story about a woman having a similar experience and, queue the waterworks, everyone went on and on about the generosity of the company’s return policy. It just struck me how shoddy a lot of the goods we must buy in this day and age and then get the spin put on us that these companies are so generous & good to us. I feel grinchy but its so disheartening.
Suzy Toronto says
I work in the wholesale industry. The way stores get around the defective or any reason return issue is that they use a business model called “Scan Trading”. Basically the store doesn’t even pay for item until it’s scanned through the system as a paid transaction. If the item is returned, the store charges back to the manufacturer the full price of the return. Not the the wholesale price the store paid. The whole full price. The store still gets 100% of transaction. Double cost is billed to manufacturer. This new scan based trading model is making it impossible for High quality US based companies to compete. Sad indeed
Maureen@ADebtFreeStressFreeLife says
This is something I long suspected. It’s also true for the internet or online purchases, businesses that lack a physical brick and mortar location. I’ve seen internet marketers do this same thing for years. Offer no questioned asked return policies and what happens? Hardly anyone ever returns what they bought. So that course, book, etc. sits in their home, probably never opened or used. Thanks for a great eye opening article.
Brandon says
This is incredibly interesting; this reminds me of a few years ago, when my wife and I were still in college and prior to being on our path to FIRE. She had purchased some Croc shoes online. They didn’t fit right so we took them to a physical store to return them but couldn’t (something about that specific model not being in their “system.”) The clerk told us to try Kohl’s, saying “I’m pretty sure you could take them a rock and they’d give you a sweater!” The funny part is….we called Kohl’s and she was right! They said they’d take them and give us in-store credit. We used to spend hundreds of dollars at Kohl’s at a time so they still came out on top on that transaction. They gave us the in-store credit, which we of course spent, along with God-only-knows how much more on top of it.
John P. Weiss says
I knew a fellow who used to buy stuff because it was on sale. Except he didn’t need it. When he passed away there were boxes of brand new, unopened merchandise in his garage. It’s not a deal if you don’t need it.
Judy says
That’s sad.
John P. Weiss says
I agree, Judy. He was well loved by family and friends but never able to shake his hoarding tendency.
julie says
This is very sad indeed. I am a bit worried about my mum. She seems to collect things, especially clothes. And even if some rooms of her house are full of, forgive the world, crap, I can’t find the way to explain to her that this can be a problem. This is also one of the reasons that since I was in my first year of university I immediately started “educating” myself to be as minimal as possible. The idea of buying full price items makes a lot of sense. You just buy what’s really needed so you don’t waste money at all.
laura m. says
John P. Weiss: Your friend had a hoarding disorder. Some women buy too much makeup and cheap jewelry and the stuff goes bad over time and the jewelry goes out of style before it’s worn. again, it’s a hoarding problem.
Jennifer @ Path to Simple says
Very interesting! I am definitely part of that 91%. I try to buy from stores (or more often, online retailers) who offer a lenient return policy. And, I have to admit that I do often use it. I try to keep a minimalist home and lifestyle, so I have high expectations for the things I buy. If something does not meet my expectations, it goes back. Also, I am now in the habit of never shopping without a list. I have stopped visiting stores just to “see what’s on sale.” This helped me reduce my purchases, and in turn, my returns.
Linda Sand says
I don’t shop often but when I do I rarely return items I have purchased. If they don’t work for me they go into the “Goodwill” box and become part of my donation system. I feel good knowing it is likely someone else will enjoy that brand new thing at a much reduced price. I am thrilled to finally be at a place in our lives that we can afford to be the ones donating instead of the ones shopping thus passing on the favors we received in our early years.
Kellen says
I agree, it’s just easier to donate the stuff and stop buying so much of it. Amerikkkans donate so many clothes (literally mountains of the stuff) that the bulk of it isn’t sold in amerikkkan stores, it’s shipped overseas and distributed to the exploited countries where it’s sold by small street vendors and shopkeepers, especially in Africa and Asia.
I can attest to that, having spent much of my life working in African countries doing mop-up in the aftermath of U.S. military and imperialist destruction, in refugee camps, border areas, etc. Locals wearing western clothing, tiny stalls and tents with items for sale, etc. Only a small fraction of donated clothes stays in the U.S., there simply aren’t enough Goodwills and SAs and other secondhand stores to hold it all in the imperialist core.
Suki says
Kellen, you make a really good point about clothing donations. I listened to a very good radio short about the subject on the BBC last year. After spending at least 3 years trying to minimise my wardrobe hearing about African countries being deluged with our reject clothing changed my attitude to buying clothes once & for
all. There IS no market in the UK for low quality mass produced second hand clothing & yet tons are dumped on other countries every year.
Karen @ Pieces of Contentment says
The psychology of shopping is very interesting. I like the opening quote – a little like my own ‘Save 100%, when you don’t buy it!’ Another of my favourite not-buy tricks is to multiply the ‘special’ price by ten (one for each of our family) it soon doesn’t look like much of a bargain.
Stacy says
Yes! This is so true. I worked at Nordstrom for a couple summers during college and experienced just this. Nordstrom basically has no return policy. Anything can be returned, anytime, no tags or receipt needed. And I watched many people use this as a reason to buy more initially. The issue is that as soon as something enters your home, a higher value is placed on that item. Pair that with the inconvenience of returning to the store, and you’re keeping items you never planned to. My policy is to wait 48 hours. If I still want something, then I’ll purchase.
julie says
I wait even for a week. And usually I empty the basket (if it’s online shopping). Also that is a sort of pre-owning the object.