October 16, 2014


Some of you sell widgets, and nobody ever returns widgets. That's a good thing. You picked the right business model.

The rest of us deal with returns.

On the surface, you want to do everything possible to prevent a return. You lose the sales associated with the return, and you are dinged five bucks or ten bucks for shipping and/or warehousing fees. Your CFO sure doesn't want you encouraging customers to return merchandise, now does she?

When you do the math, however, you learn two very interesting things.
  1. Returns act as a "mini-order" if the customer exchanges the item for something else. In other words, if the customer spends $100, keeps $50, and exchanges $50 for another $50 item, the net of $0 in the transaction is offset by a "mini-order" of $50 ... the customer performs more like a 2x buyer spending $150 than a 1x buyer spending $100.
  2. In almost every business I analyze, you have an eight-to-twelve week window to encourage a customer to buy again ... then the customer slowly becomes inactive.
So use the opportunity to encourage any communication with the customer in the weeks after a purchase.

And if you're really concerned about returns, then stop emailing customers who return merchandise all the time!

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