And yes, people WILL return used underwear…
There’s a lot of talk about refund policies. Should you offer one at all? How long?
Most people, being average, settle somewhere in the middle. 30 or 60 days are common.
Some keep it short. Some, especially on monthly continuity products, don’t allow refunds at all.
But today, let’s look at the other extreme. Companies that offer seemingly crazy, unlimited refund periods.
The biggest example here is Costco. And that’s telling, because this works best with physical products.
Maybe you’ve read the refund horror stories online.
The restaurant that buys patio heaters every winter and returns them for a full refund every summer.
People returning old, broken down, soiled beds they’ve slept on for the last 10 years, exchanging it for a brand new one.
Things that aren’t even from Costco. Things with no receipt.
Yes, even the worn, stained, soiled pairs of Kirkland Signature brand underwear.
They take it all back, with a smile, and give people their money back.
To a lot of people, this seems crazy. And maybe it is.
But it seems to be working for them. Working well enough that they can eat the cost of these frivolous returns and still succeed.
How is this possible? Why does this work?
For the same reason that “no refunds” policies often work. (we’ll talk about that in the next email.)
Because they stay true to the REAL purpose of having a refund policy in the first place.
Some people, especially with digital products, view the refund period as a sort of “trial.”
Buy the thing without giving it any thought, see if you like it, download and hoard all the available files either way, then DEMAND all your money back.
These people are junkies, and a plague on the industry. But unless you’re doing things VERY wrong, they are not the majority of your customers.
And this is NOT why refund policies exist.
The refund policy, or guarantee, or whatever you want to call it, exists to reassure people.
Not just any people. BUYERS. People who have already looked into the product and made the decision to buy.
The refund policy isn’t the reason they buy, but it might be the thing that overcomes the last bit of resistance.
“But what if this was all a lie and the product is actually shit?”
The refund policy is there to eliminate that risk.
Which brings me back to Costco. How does someone justify buying an entire new living room set on a whim when they just stopped to get more milk?
Because if the spouse comes home and hates it, they know they can return it!
And let’s face it. Returning a living room set is a HUGE pain in the ass. Most likely it stays right where it is.
Companies like Costco are able to eat the cost of these crazy returns because it’s a small portion of their sales.
And there are two main things keeping this number low for them.
- Shame. This one is unfortunately going away, but most people would be ashamed of themselves for returning a used pair of underwear, or a 10 year old fridge. People will stare and point. The clerk may ask some questions. Not worth being that much of a piece of shit.
- Difficulty. Costco sells physical items. Most are either large and bulky or perishable food. Some are both. It’s hard to drag that living room set back to the store, and it’s unpleasant to bring that package of rotten meat you forgot about in the trunk of the car back.
Some people will of course still make ridiculous returns. Others will make real, legitimate returns, if the thing is broken or something.
But for the most part, items leave Costco in those repurposed cardboard boxes and they don’t come back.
And that’s why, as much as I usually hate them, very generous or even unlimited refund policies CAN work.
Keep an eye on your inbox for the next message, The Case for a NO REFUNDS Policy (my personal preference, especially for information products)
— Mark
