Have you tried to make a return and it was denied by a retailer lately? If as many you were frustrated by the experience, you are not alone. However, if you have not yet faced that problem, be aware it might happen next time you decide to make a return. That is because of the expression retail equation. Usually, that is the guide a customer service representative will rely on to accept or to reject your returns. Evidently, retailers have updated their returns policies to include this new norm.
Background
Online shopping has exploded over the past few years. However, the success has brought many challenges to retailers. Among many, returns are the most pressing issues. Because of the cost associated. These include direct costs such as free shipping labels and indirect costs like additional space to stock return boxes. So, to help retailers retail equation stepped in.
Returns are the ultimate incentives for customers, but they are not so good for retailers. That is because they give customers the possibility to send back products if for any reason they do not like the purchase. In addition, they can ask for a refund. It is a great way for retailers to build trust and loyalty with customers. What is often seen as a win-win situation for all parties, is increasingly becoming a big burden for retailers especially for online retailers.
Generally, returns force retailers not only to reverse engineer their sales processes; but also, to absorb the cost that is attached. That is why typically a sale is never a sale until the refund window is over. As a result, returns policies are plagues into a retailer’s wallet. It eats into their profit margins.
Indeed, free returns cost retailers billions of dollars each year. According to an article published on Shopify, returns cost companies more than $550 billion in 2020.
So, to fix that problem, in the USA many online retailers have updated their return policies either by reducing the return window or by making it extremely challenging to return a purchase. Nonetheless, over the past few years, they‘ve started banning serial returners as an extreme measure.
Retail equation
That is the job of a company called “Retail equation”. The company collects data from participating retailers across the country to establish a customer’s shopping habits then allocates a score. Evidently, just like a credit score company.
That information is often shared with other retailers. Hence, customers that do multiple returns are flagged. Perhaps customers that are considered as abusers of return policies are simply cut off from making any returns. The retail equation claims they are helping retailers fight against customers who abused the system. Indeed, there is growing evidence of some customers abusing return policies or taking advantage to use the product without ultimately purchasing the product. For now, the system put in place by the retail equation works. There is growing evidence that returns among participating retailers are dropping.
Conclusion
Retailers must carefully balance between targeting abusive customers and driving customers by chipping away one of the great incentives. Customers value returns especially online shoppers. Regardless, next time you are thinking of sending back that product you recently purchased think twice. Still, the good news is you can check your score simply by visiting the retail equation official website.
