Avoiding the Post-Holiday Return Blues

Christmas ChildrenFour tips to keeping customers coming back and sales staying put.

By Sherron Lumley.

Giving back is an admirable holiday tradition, but not one that retailers like to experience at their customer returns desk. And though this holiday season’s sales figures set a new record, the National Retail Federation (NRF) estimates that merchants will have had to give back 10 percent of that revenue—roughly $47 billion—in returns come the end of January.

So how does a small business avoid this blowback effect and ensure its sales stick? Two small business owners share their post-holiday strategies for keeping sales strong and customers coming back (to buy).

Tip # 1: It starts with good customer service

Bill Evans, longtime owner of the Pacific Northwest Shop in Tacoma, Washington, says holiday returns call for “C.S. and that stands for customer service.” For four decades, his store has prided itself on that very trait, so he treats the post-holiday period no differently. Service is what they are known for, he says, from complimentary gift wrap to hassle-free returns. Whatever it is, “we take it off their hands,” says Evans, who chuckles and adds, “the fellows just stand there and say, ‘You do everything!’”

Pull-Quote-Tall.pngAt nearby Dwell Home Décor in Tacoma, Suzanne Molt says their return policy also emphasizes customer service, allowing for refunds or exchanges within 14 days with a receipt. “We don’t want them to worry about their gift purchases,” she says. When customers know their holiday gifts are returnable, she adds, “It makes them more comfortable.”

It’s important to remember, though, that most people don’t bring gifts back. In fact, a NRF Holiday Returns Survey from 2010 found that nearly two-thirds of holiday gift recipients—64.5 percent—didn’t return a single item. Still, retailers would be wise to plan for extra staff during the traditional post-holiday rush to ensure a more seamless experience and to avoid souring the customer on your business as a whole. And that idea that there’s still goodwill to be salvaged in customers returning items is an critical one—the same NRF survey found that the nine out of 10 Americans say they find store return policies to be “fair.”

Tip # 2: An annual January sale

Every January for the last 35 years, Evans’s Pacific Northwest store has had its once-a-year sale. His customers now look forward to the annual event, where he features artisanal products such as paper, clothing, wine, food, books, pottery and tea made by small, local businesses. The five-day January sale achieves about 50 percent of his total holiday rush volume, which means the shop can pay more money to its producers in what is traditionally a tough sales month.

At Dwell Home Décor, Molt sends out a direct mail coupon for 25 percent off one item in January to bring customers back into the store. For customers with returns, Molt says her staff tries to suggest a replacement item rather than just refund the cash.

Tip # 3: Keep the sales momentum going to the next ‘event’

Because Dwell carries many gift items, one thing it does to keep January sales up is to start promoting Valentine’s Day early. Molt, who took over the business with her partner two and a half years ago, says it gives customers another reason to visit the store. For its part, the Pacific Northwest Shop begins to promote several annual charity events right after the holiday season, such as a local Breast Cancer run.

Tip # 4: Tap into online sales (where returns are less common)

“We’ve had Internet sales for five years and we just got our first return,” notes Evans, who recounts the tale of a woman in the eastern part of the country who wasn’t satisfied with the paté she ordered. As part of his hassle-free returns policy, he issued a refund immediately, likely saving her as a customer. “We’ve worked our Internet sales up to 25 percent of our business,” he says. And with a lower rate of returns, e-commerce sales can help a small business to thrive, not just survive.

Internet sales also add to a company’s bottom line by opening up new markets. What’s more, when trying to avoid a post-holiday sales hangover, it’s important to remember international markets also have different holiday seasons. For example, the Pacific Northwest Shop just filled an order to ship tea…to China, where the important New Year’s holiday arrives during a typically slow period in the Western calendar—late January or early February.

Tip #5: Beating Holiday Return Fraud

Unfortunately, the high volume of holiday returns brings with it a higher level of fraud. For the 2010 holiday season, 7.5 percent of all returns were suspected to be fraudulent and four out of five retailers were likely victimized at some point. In all, nearly $4 billion is expected to be lost to fraudulently returned merchandise this year, according to the NRF’s Return Fraud Survey. Stolen merchandise and employee fraud returns were the most common types, but other tactics such as receipt counterfeiting and wardrobing—the return of used, non-defective merchandise—were also pervasive.

There are two commonly recognized (and easy to implement) tactics that business can use to prevent return fraud. One, follows Molt’s lead and establish a firm time period—two weeks, in her case—beyond which returns are not accepted. Then stick to it, especially after the holidays. Two, ask to see customer ID for all returns. This is a particularly effective method for preventing fraudulent returns of those items presented without a receipt, but one-third of retailers still don’t take this simple step.

To beat the holiday return blues, keep in mind that customers returning to the store are an opportunity to generate more sales, not just lose them to returns. Since some shoppers may be visiting the store for the first time, it’s also chance for a small business to introduce itself through excellent customer service in the hopes they do come back. But not to give back.

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