“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.
Hulga says
I hate it when it happens that I have to return a piece of clothing (say a gift that doesn’t fit my kids) and end up spending more because I get a store credit and it totally feels like free money. The problem is I end up always spending more then I had credit for….grrr…Thanks for the article. Lots to chew upon…
Kellen says
It’s a problem with mail order clothes. I finally just ended up donating clothes that were too big or whatever. (I don’t know why sizes have to be so fluctuant between manufacturers!) Donating stuff I wouldn’t wear helped me along the path of decluttering more since I was more careful about buying stuff.
Now I only buy used clothing at vintage and secondhand stores, and only when I need it. I’m down to owning only two t-shirts and two blouses, and I’ve resolved to buy only secondhand and only at the point that it’s absolutely necessary.
Rosanna says
I just discovered another way that I don’t fall in the majority category! I suppose a lot of that has to do with being a natural saver, living far away from most shopping, and not being much of a shopper. When I do go shopping, I think long and hard about whether I really like the item, whether it fits right, etc. I do often shop online, but only from retailers that send me postage paid shipping return labels. Even than, it is mostly for my young children and I know what size they wear so I almost never return anything. I would find it very annoying to have to return an item and being a natural saver, wouldn’t want to avoid it-if necessary. That being said, I can see how people often don’t end up taking stuff back-it really is an inconvenience.
Melanie says
I know this is a bit off topic. But I’m so glad I found your blog a bit over a week ago. Since then I’ve donated 15 big bags to charity, three away 7 and sold another.
I’ve never felt so free and happy.
I used to go shopping every weekend. Even if I only spent a small amount of money I had to part with it so I could be ‘happy’ for a tiny bit.
Being a mother I now spent more time at museums, parks and the like.
My partners family are very materialistic and I don’t quite know, if they will take my new life seriously and they will definitely be super disappointed when I’ll only gift them experiences and/or consumables.
I’m not telling them but the gifts they’ll give me will most definitely go to charity as I don’t need anything (just telling them to donate money in my name or not giving me gifts unless consumable would not happen)
The only two things I intent to buy this year are a pair of new slippers (my old ones are worn to the point of being unwearable) and a new laptop (mines been broken for a while)
I wish I could find people like me in my area, I’m not on Facebook though so that will probably not happen.
For now this is my only outlet and I love reading everyone’s input.
Thank you Joshua for writing and sharing your experiences with us.
Kellen says
Or just don’t give any gifts, even “consumables.” Isn’t your presence enough? My friends and I go out and eat together on the holidays and special occasions. We never give gifts. I don’t want anything since I’m uncluttered down to the bone, and they all have their own lifestyles and can afford to buy whatever they need or want. If they need something or need some financial help, they know they can ask me and I’ll be happy to help them.
Maisy K says
Another variation of the return advantage for the retailer…you buy something that is “iffy” but rest in the knowledge that the item is easily returned. You decide it’s not right, return it, and receive a credit that feels like free money. So you go back into the store with the credit and choose something(s) that costs even more than the first item.
Unfortunately, I used to do this very thing at TJ Maxx. It has been two years since I decided that I could not handle that store. So far, so good.
Kalie @ Pretend to Be Poor says
I abhor the inconvenience of returning items and this definitely limits what I bring home, though I’ve fallen prey to this trap before, too. I also find it ironic how advertisements depict their products in immaculate, minimalist spaces, as if purchasing the product will make your home less cluttered. Of course just the opposite it true and I try to keep this in mind to avoid over-buying.
Jeff Mc Clung says
Good post, Joshua. I know I’ve bought into that lie many times over the years. I really like the stats and info you put in here that reinforces what you’re talking about.
Looking forward to your book coming out in may!
Heather says
I can see where this is true! I hate returning things, but refuse to shop anywhere that doesn’t have at least the standard 30 day return policy. Reason being… I purchased a laptop at Best Buy and never could get things running just right (didn’t know if it was the laptop or user error). I went to return it 20 days later but… GUESS WHAT? 14 DAY RETURN POLICY!!! WHAT? It had been changed a short time before my purchase and I had no idea. None of the staff told me, cautioned me, nor were there large posters stating the change had happened! I was astounded. I now had a faulty laptop that I was stuck with. So, no good return policy= no business from me!
Online retailers are another thing. I HATE mailing anything! I go to great lengths not to! But, I love to shop online! I am super careful where I buy and think long and hard about what I buy because of my disposition on mailing. My favorite online retailers are Amazon and any that I can return their items to their brick and mortar store locally.
My friend is the queen of shopping and returns. I don’t get it, but then again.. she always has birthday presents on hand, party gear, seasonal decor, and plenty of everything to give to her friends in need! I watch in amazement as she stacks deals on top of deals to pay very little for these things, but I simply cannot do it. I don’t have the funds nor the space to do what she does.
Judy says
! Buyer Beware !
IBikeNYC says
I had never thought of this this way, but it HAS to make financial sense for the vendor, or they wouldn’t do it!
I literally almost never buy anything unless I am sure it’s a keeper, but when it does happen, I nag myself CONSTANTLY until I’ve returned it.
One thing I have started doing, mostly at the supermarket, is checking the seals on things that have seals, like cottage cheese. I lift the cover and poke at the seal to make sure it’s firmly in place.
If it is, I buy it.
If it isn’t, I bring it to the attention of someone in charge.
The second time I got something home with a broken seal was the last!
Even an OCD-driven returner isn’t gonna bike an extra eight miles just to exchange a pint of sour cream!
Shannon says
Having just returned two items to the store yesterday, this hits home for me! :-) Though I suppose I should be grateful I actually returned them, rather than leaving them in my home… Part of my problem is that I’m usually shopping with several children in tow, so I don’t have the opportunity to try things on — at least without significant logistical difficulties!
I actually hate making returns, so that keeps me from the “I can return it” mindset… most of the time. I know there are times I’ve used that reasoning when I’ve purchased something! And there have been those items I couldn’t return because I lost the receipt, or just waited too long. The time/stress associated with buying an unneeded item, even assuming it can be returned, is just not worth it!
What a good reminder that retail stores are not there to help the consumer, they are there to make money. I can’t fault them for that, but I also don’t want to fall into the trap of consumerism!
As always, your blog is such an encouragement!
Cheers,
Shannon
Judy says
On a daily basis I see people come in to do a return…and walk out with bags full of more merchandise. It is a trap. Also, our customer service is WAY at the other end of the store…so you have to walk through isles and isles of “temptation”. Just like a casino—stores are designed to take your money. Bottom line. The best way to save money is not to spend it in the first place.