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Tips For Managing After-Christmas Gift Returns

The holiday shopping season — from Nov. 1 to Dec. 31 — is the most lucrative time of year for American retailers. This is especially true between Thanksgiving and Christmas Eve.

In fact, the holiday shopping season is often used as a litmus test to assess the health of America’s economy. This explains why news organizations are so eager to publish each year’s sales figures. According to Fortune magazine, for example, 2016 brought in a staggering $91 billion in revenues — and that was just for online sales.

When you look at total holiday spending, the number hovers between $800 billion and $1 trillion.

These numbers are definitely worth celebrating.

Far less celebrated, however, are holiday season returns. Yet, this is the busiest time of year for such exchanges, with an estimated 23 percent of all returns happening shortly after Christmas.

These returns represent billions in lost sales. The damage is even greater when you factor in the administrative, delivery, processing, restocking and staffing costs that retailers must pay out of pocket.

As a merchant, how can you minimize the impact of these post-Christmas returns?

Reducing the Severity and Frequency of Returns During the Holidays

Returns are an inevitable part of retail. This trend is especially pronounced during the holidays, since the buyer and recipient aren’t the same person. When it comes to gift giving, there’s a lot of guesswork involved. Thus, there will also be a lot of “unwanted” items that are ripe for returns.

Worse still, you can’t require customers to present the original credit card when returning items. If Grandma has already left for Houston, there’s no way for Junior to prove his ugly Christmas sweater was truly purchased at your store.

However, there are still steps you can take to reduce returns:

1. Use More Gift Cards

Gift cards are a great way to shift decision-making power to the end user. Card recipients are less likely to return unwanted items if they’re the ones making the purchase.

2. Offer Store Credit Only

Offering store credit won’t necessarily reduce returns, but it can help you keep more of your hard-earned cash in the till. Store credit also guarantees that you’ll receive at least some repeat business during the non-holiday season.

3. Use Virtual Fitting Rooms

In the brick-and-mortar world, customers can easily touch and try on whatever they buy. In the online world, though, this isn’t possible.

However, virtual “fitting rooms” and “size calculators” can help cut down on fraud. When the Running Warehouse began using the shoe-sizing app, Shoefitr, it managed to reduce returns by 23 percent.

4. Keep a Log of Returns

A useful long-term strategy is to keep a running log of what is returned — and why:

  • If customers complain of damaged packaging, then choose a different delivery service.
  • If customers are consistently unhappy with Product X, consider dropping that supplier.

The point is, there’s information in these returns. These insights can be used to streamline your retail operations.

5. Larger Clothing Tags

When selling clothes, consider adding larger tags to each item. This helps to reduce “wardrobing fraud” in which recipients wear gifted clothes for a while before returning them.

If a tag has been removed, you know that item has been worn in the street, and you don’t have to honor the return.

A Counterintuitive Approach to Reducing Holiday Returns

There is one final way to reduce returns — but it’s a bit counterintuitive.

You could simplify your return policy by making it easier to find, read and initiate.

The benefits of this approach are two-fold:

  1. Answering customer questions, sending shipping labels and printing receipts are all expensive and time-consuming activities for your staff. However, if customers can easily find and act on this information without tying up your team, you can save money — even if returns increase.
  2. Customers appreciate transparency. Ninety-two percent  indicate that they would be more likely to do business with retailers that make their return policies easier. You might lose a few initial sales early on, but the long-term benefits are definitely worth it when you factor in the lifetime value of happy customers.

Are you interested in other ways to reduce returns within your retail store? Discover how Tailored Transactions secure payment processing solutions can help.

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