A friend who likes buying shoes but hates to go to the store buys them on-line. But shoe buying, at least for her, is not a straight forward task. There are so many styles and the sizes do not always promise the same fit. So she orders several styles, of different sizes. When the boxes arrive, she tries them in the comfort of her home, and then returns those she does not like.

“They do not charge for returns!” she exults, using the pre-paid return label. But who pays for the boxes, the freight to and fro, and the administrative costs of managing the return process? Surely, these costs are built in to what she pays. But society also pays a price in all the fuel being burnt unnecessarily, to say the least.

The consumerist society that America thrives upon tries to make shopping as easy as it possibly can. From ‘Buyer Beware,’ companies moved to a system of giving full refund on returns when accompanied by a receipt, and sometimes store credit where there is no receipt. The day after Christmas, major stores will see long lines of people waiting to return or exchange an item they received as a gift.

An item is returned because it does not fit, you have second thoughts on whether you need it, or the product may be defective. You would think that a returns policy needs to distinguish between the reasons. Defective products should be taken back, no questions asked. But if the customer has changed his mind about the purchase, but it otherwise is serviceable, the item goes back into the sales line and the retailer does not lose. Customer goodwill is key. Giving the customer a worry-free guarantee to take back an item if purchased by mistake or unwanted is one guaranteed way of enticing her to shop more. The shops figured that even if a few misuse the return policy, it is good for overall sales.

Getting wise

But no more. Shops are becoming wise. Big data helps wisdom. Retail Equation is one of a few companies that have seen profitable business by injecting themselves between the retailer and customer to try and eliminate bad behaviour. They track customers’ returns and trim costs by setting rules. Retailers estimate that about 11 per cent of sales are returned and trimming this can significantly trim costs. The question is how to eliminate fraud without irritating the genuine frequent customer.

One method is to create a score for a customer based on his pattern of returns. Are there specific kinds of items that are returned, how frequently, and so on. My shoe-buying friend will quickly be flagged and warned that future returns will not be accepted.

L.L. Bean, which sells outdoor goods, sent me an email telling me about a change in its return policy. The family-owned 100-year-old company based in Maine is well known in the north-east for hard wearing clothing and camping items. Their returns policy went above and beyond what was needed to keep customers happy. If something was even not lasting as long as you think it should, they would take the used item back years after purchase. Finally, modern civilization caught up with them. They found people ‘returning’ items that they had picked up from trash, or even bought at second-hand stores, for a refund. The company’s email said that they would now take items back only within one year, and if accompanied by a receipt or some proof of purchase.

The writer is a professor at Suffolk University, Boston.

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