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Forrester Studies Online Return Policies

10/27/2008 02:14:00 PM Eastern

Cambridge, Mass. — Online retailers with generous return policies, in the long term, have the ability to grow sales, generate loyalty and drive incremental revenue, concluded Forrester Consulting following a recent study it performed for UPS that examined the effects of a retailer’s return policies on online sales.

The study gathered insight from both retailers and consumers.

Forrester found: “Most electronics retailers tend to view overly-generous and overt return policies as a ‘margin-drain’ and believe their efforts are best spend engaging in initiatives to help avert returns altogether.”

It also found: “Few online retailers believe that a liberal returns policy can drive incremental sales or loyalty in that long-term.”

In general, consumers said they viewed the idea of returning an item purchased online as a hassle and that in many cases the prospect of having to return an item caused them to reduce their online spending levels altogether.

The market research firm said “an inflexible or stringent returns policy can be an obstacle to growth, particularly as those consumers most likely to return items also tend to be the most active online buyers.” This conclusion was based off the responses of consumers who had purchased products online in the last six months and who had either returned or intended to return some of those items. The study found:

·         81 percent agreed with the statement: “If an online retailer makes it easier for me to return a product, I am more likely to buy from that retailer”;

·         81 percent agreed with the statement: “I am more loyal to retailers that have generous return policies (e.g. free return shipping, ability to return any time for any reason)”;

·         73 percent agreed with the statement: “I am less likely to buy in the future from an online retailer where the returns process is a hassle.”

Among customers who had specifically purchased electronics in the past six months, Forrester found:

·         72 percent were likely to shop an electronics retailer with a flexible returns policy;

·         29 were likely to shop one with an inflexible policy;

·         73 percent said they would recommend an electronics retailer with a flexible policy to others; and

·         24 would recommend one with an inflexible policy.

Based on its findings, Forrester surmised, “Returns policies are a bigger factor in consumers’ online buying decisions than most retailers realize. Businesses who make it easier and less expensive for customers to return their products derive and advantage over competitors — and are likely to, in the long term, see increases in sales, customer loyalty and incremental revenue.”