Some heartening news for retailers who have a high returns rate from their online customers: The more goods a customer returns, the better he or she could be for your business. That's what online shoe store Zappos has found. People who returned half of their orders made the company more money. The store, which was bought last year by Amazon, and touts its free shipping and returns policy, claims that clients who buy its more expensive footwear have a 50% return rate. But the higher profit margin on those high-end items is worth the added shipping costs.
"Our best customers have the highest returns rates," said Craig Adkins, VP of services and operations," but they are also the ones that spend the most money with us and are our most profitable customers." Zappos' modus operandi is not to give its purchasers the cheapest footwear on the block, but to give them the best service: hence, a 365-day returns policy, and free two-way shipping.
When you think about it, it's a bit of a no-brainer—and something that Natalie Massenet, founder of Net-a-Porter, who earned $80 million from the sale of her high-end online boutique last month. "We owe it to our consumer to offer her various options for how she wants to shop, we shouldn't impose rules on her." And Zappos' marketing chief feels the same way. "Customer service is the new marketing," he trumpeted to Fast Company last month.
Many stores tighten up their returns policy during the holiday season, giving shoppers less time to return unwanted goods, and sometimes even dropping their unconditional returns policy. Noam Paransky of retail consultants Kurt Salmon believes that, once a firm has decided on a policy, it should stick to it. "The generosity of a returns policy needs to be tied to a brand strategy."
As more and more people—some of them most unlikely—turn to online shopping, Zappos' theory is one that more e-tailers should take note of. Although down by 0.2% from the previous year's figures, consumers handed over $129.8 billion to online stores in 2009.