December 28, 2005

Retailers see payoff from tougher return rules

By Martinne Geller

NEW YORK (Reuters) - Before bringing back that itchy, brown
sweater or that not-quite-state-of-the-art laptop computer,
consumers this year should check to see what returning it to
the store will cost them.

While the boom in gift card sales has cut into the number
of people who return unwanted holiday gifts, many unhappy gift
recipients trying to make returns face a harder time.

On average, returned gifts reverse about 4 percent to 6
percent of holiday sales, according to the National Retail
Federation, a retail industry trade group.

Retailers have toughened up their return policies in hopes
of reducing their occurrence, said Britt Beemer, chief
executive of consumer trend tracking firm America's Research
Group, and the heavier hand is working.

Ten years ago about 38 percent of Americans returned an
item, compared to just 14 percent today, Beemer said.

Stricter return policies often include a so-called
"restocking fee," which forces consumers trying to return
opened items to pay about 15 percent of the item's price.

Retailers including Target Corp., Best Buy Co. Inc., and
Circuit City Stores Inc. charge the fees on items such as
computers, projectors, camcorders, digital cameras, radar
detectors, GPS or navigation devices and in-car video systems.

Best Buy charges a 25 percent fee on special-order items,
including appliances. The fees apply unless the item is
defective or damaged, the customer receives the wrong item, or
the fee is prohibited by law.

"Consumers might think (restocking fees) are unfair," said
Beemer. "As long as they feel it's unfair, they'll be less
likely to go back to that store."

Kurt Barnard, president of Retail Forecasting Group, which
tracks industry trends and spending, said fees that consumers
feel are unfair are "a good way to lose a customer."

Wal-Mart Stores Inc. does not charge restocking fees for
opened merchandise, and does not require customers to have
store receipts. Nordstrom Inc. also does not require a receipt.


Retailers justify the fees by saying they help cover the
discrepancy in the price, since they must sell opened items at
a discount. Others say they serve to deter one-time use.

"Once those products are opened, we can no longer sell them
at full price, so we have to make up for that," said Circuit
City spokeswoman Amanda Tate.

Erin MacMillan, a Best Buy spokeswoman, said the fee is to
discourage people from "buying a notebook computer and using it
for the weekend."

Fraudulent returns, like returning a flat-screen television
right after a big sporting event, or a fancy dress after a
formal affair, cost the retail industry $16 billion a year,
said Scott Krugman, a National Retail Federation spokesman.

Krugman said retailers are trying to crack down on
fraudulent returners, but keep it easy for honest consumers.

"If you are an honest consumer, chances are restocking fees
won't affect you," he said, noting that a recent federation
survey showed that 88.6 percent of consumers felt that return
policies were fair.

This could be a boon to retailers during the post-Christmas
rush, when consumers flock to stores to use gift cards or
return unwanted items.

Merrill Lynch analyst Mark Friedman said the post-Christmas
sales accounted for about 10 percent of holiday sales last year
and could see a bigger share this year as gift cards grow in

"Schools are closed, people are on vacation and returns are
being done," wrote Friedman in a note to clients. "This means
store credits or cash to burn."