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Tis The Season For A Refund

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One of the often overlooked customer service issues that businesses could use to gain a competitive advantage is the use of a liberal exchange and refund policy. This is of particular advantage for retail outlets such as those specializing in clothing and/or merchandise. Of course, this issue tends to be most prevalent during the holiday season since it is estimated that ten percent of all retail sales result in either exchanges or refunds. While this means that merchandise returns are a normal part of business, there are some strategies that you, the business owner, can adopt in order to either increase business or reduce the number of refunds.

Let’s start with three different examples that recently occurred during the après Christmas rush, all involving members of my immediate family. It should be noted that all of these stores are located in the same mall complex and thus share some similarities.

The first store, when faced with the likelihood of having to refund or exchange a DVD that was accompanied with the receipt, demanded to know if the product had been used. Thus, right away the customer feels like a criminal and is expecting the worst. In other words, they expect that they are going to get a “hard” time from the employee. This is a great strategy to use if you’re goal is to scare away customers.

At no time during this encounter did the employee ask if there was another DVD or product that the customer would like to exchange for the defective one. Instead, the employee reacted with a negative disposition, turning the customer against the employee and ultimately the store, resulting in the customer thinking twice before returning to the store. Thus, not only did the store lose a sale and spend valuable resources processing the return, but also they suffered negative publicity, and quite likely, lost some future business.

Instead of the above scenario the business should consider implementing some of the following suggestions:

Rotate employees on a regular basis, such as every two hours, so that they are not left at the exchange desk all day. Nobody wants to have to do the “dirty” work all day, so share the chore amongst all employees and treat it as a team building exercise. The goal is to gain notoriety as the business that is pleasant to deal with, whether you are buying or returning items. Remember, customers don’t come to your business because they want to feel unwanted.

Ensure all employees are familiar with, and trained in methods of turning the negative aspects of exchanges and returns into a one for one exchange or even an up sell. The exchange or return issue is an opportunity for businesses to earn a lifetime of sales from their customers. A no hassle return policy that is lived up to makes believers out of most sceptics. Don’t miss this opportunity to build customer loyalty.

The second store, when faced with the likelihood of having to refund or exchange some clothing that were received as a Christmas gift, without a receipt, abruptly refused to either exchange the clothing or offer a refund without the receipt. This rule was adhered to even though these clothes were obviously purchased from that very store. Just looking at the labels can usually be used to prove the store of purchase, and this was certainly the case with these clothes.

Unfortunately, this store didn’t bother to do so, even though the customer only wanted to exchange the clothes for a different size that would fit. Even if the customer is able to obtain a refund, or exchange the clothing, they will certainly think twice before patronizing this store again. On top of this, they will tell all their friends that this store isn’t very friendly to deal with when there are problems.

Along with the above-mentioned comments, this store may want to adjust their policy to allow exchanges without receipts when it is obvious that these clothes came from the same outlet. In order to reduce the chances that these were stolen or shoplifted items, proper identification could be obtained along with a brief explanation of why there was no receipt.

Also, it is not unusual for stores to record the personal contact information of customers, along with what they have purchased. This will allow the store to search their database at a later date to see who purchased these items and compare that with the person looking to exchange the goods.

Of course, the obvious answer is to include a gift receipt with the purchased items (stapled to each item is best). This allows the easy return or exchange of items.


The third store took a completely different approach. First, their sales staff were very friendly and helpful, something which they are known for. Customers are made to feel welcome and a sales person is always willing to help when needed.

This store happily allows customers to exchange clothing, no questions asked, even if a receipt is not available. To make this experience even more positive, the customer is told that they have seven days to exchange the new item if they so desire.

This is the second year in a row which this person has exchanged a gift and both times I have witnessed the same results. I noticed that this customer service was extended to all customers on both occasions. Perhaps this explains why this store always has customers inside.

If you are still hesitant to change the way you handle exchanges or refunds, or don’t see what the “problem” is with the first two examples, then you may want to ask this question: Which store would I shop at? I can tell you that the third store is the first place I think of, and shop, at when looking for clothing. That sentiment apparently is shared by a number of other happy customers. 

-Myron Gordon owns TMSG Management Services Group, which provides management and financial services to growing businesses.

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