How to Offset Costs from Returned Merchandise

arkadia receipts

It might be a little late to be just talking about this now, since Christmas 2012 is already a distant memory, but it brings to mind the problem small businesses face with returns. Returns can be very, very costly, and are not just a problem around the holidays. That’s why some places simply don’t allow them.

But ultimately that’s an unfriendly vibe you’re broadcasting to your customer: “Buy from us and too bad if you have any problems!” is what you’re basically saying.

On the other hand, if these are shoplifted items that are trying to be passed off as returns, well, then you can understand why some take that stance.

“Most certainly there is a cost of returned items, but that cost is much greater when the items being returned were shoplifted in the first place,” explained Fred Tarasoff, a loss prevention specialist at Tarasoff and Associate. Tarasoff says, also, that many companies relax their policy during the holidays, due to unwanted gifts they’d rather exchange for something else, etc. and he says that shoplifters know this as well.

“This is when losses can really add up for retailers,” said Tarasoff.

Jeff Kurpuis, who owns a corset and shapewear business, says his business is especially prone to returns because it deals with “clothing of, should we say, an intimate nature” that people buy online. Anyway, to offset the large amount of returns, this is what he does:

If the item is cheap enough, we will just send the customer another size and let them keep the wrong size to give away to either a friend or charity thrift store. That is a hit to us, but it minimizes the handling of the returns, saves on return postage and builds good will with customers.

Another thing we do with higher ticket items, since we cannot resell them as new, we simply sell them on our eBay outlet store. That way the customer know they are getting a store return and for the discount they are willing to take that.

Chris Peacock, CEO of HandSteady Ltd, says small startup expects 17 percent of its products to be returned and they also offer a 30-day money-back guarantee, which is “the standard for many mail-order businesses.”

This approach seems to be the best of all worlds because, as Peacock says, it enables you “to be prepared financially for such returns, including the cost of handling returns and processing refunds. This also enables us to be cheerful in our emails to customers who return products, and this positive customer experience means that they're more likely to refer us to others.”

Which, after all, is what you’re looking for in first place, right?  

David Wolinsky is a freelance writer and a lifelong Chicagoan. In addition to currently serving as an interviewer-writer for Adult Swim, he's also a comedy-writing instructor for Second City. He was the Chicago city editor for The Onion A.V. Club where he provided in-depth daily coverage of this city's bustling arts/entertainment scene for half a decade. When not playing video games for work he's thinking of dashing out to Chicago Diner, Pizano's, or Yummy Yummy. His first career aspirations were to be a game-show host.

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