Returns Research Says Disclosure Works Best

Here’s a timely question, now that the post-holiday merchandise-return movement is in full swing: Should retailers who tighten their returns policies to reduce losses fess up to that move, or keep quiet about it? Definitely the former, says Huseyn Abdulla, Assistant Professor of Supply Chain Management at the University of Tennessee, Knoxville, Haslam College of Business.

“Honesty really is the best policy in this case,” Abdulla says. “Be open; be direct to your customers that you need to change this policy because it’s no longer financially sustainable for you. Use those narratives to justify your actions. Do not let your customers find answers elsewhere.”

Abdulla and his research team base that conclusion on consumer surveys they undertook in the aftermath of perhaps the most infamous change in return restrictions:  L.L. Bean’s 2018 decision to change its 100-year-old “lifetime” merchandise return policy to one year and required proof of purchase. The abrupt shift spurred furious backlash, even prompting some customers to file lawsuits.

“The general sentiment in the media we saw was, ‘If you change the policy silently, many people who don’t return or even care about the return policies wouldn’t notice,'” Abdulla explained. “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.”

To explore the hot-button topic, Abdulla and his fellow researchers invited 1500 U.S. consumers to act as a fictional retailer’s loyal customers in three experiments, monitoring their reactions to the invented merchant’s return policy restrictions. These restrictions included charging a significant restocking fee and reducing return periods to 365, 180 and 30 days, respectively. In one scenario, customers did not experience return policy changes. In the second, customers dealt with unannounced return restrictions. In the third, customers were informed of the new policies and provided an explanation for the changes.

Customers who regularly used the return service did view the restrictions with disfavor, but customers who did not or seldom returned purchases also reacted negatively to the changes. However, those who received explanations for the restrictions were much less upset than those who did not.

“If you go to Reddit, for example, or any consumer forum and search return policy changes, you see people talking a lot about the changes, and they make all sorts of inferences, and they gossip about what the ‘actual’ reasons behind these changes are,” he explains.

Basically, when merchants fail to explain restrictions on their return policies, they surrender control of the narrative about the changes, Abdulla says.

“This is the key message we want to take to the retailers,” Abdulla says. “Seeing L.L. Bean’s case with lawsuits may discourage you from announcing these policy changes to your customers, but it may get even worse if you do not do that.”

Click here for more from the research done by Abdulla and his team.