Business from a 365 day return policy. The Zappos business case.

Consumers are lazy. And that’s pretty much the business case behind Zappos’ 365 day return policy. The return policy serves a double purpose. First of all, it’s yet another proof of their over-hyped (?) dedication to customer service (and therefor a great communication instrument). But mostly, it is a great way to increase the sales per client.

The 365 day return policy makes the threshold to order more pairs of shoes lower. (Wo)men are more likely to order not 3 but 7 pair of shoes when they read they can always return them within 365 days. And that is exactly what happens: consumers order more shoes, thinking they will return the shoes if they don’t like them.

Business from a 365 day return policy

But when they actually receive the shoes, they are less likely to actually leverage the 365 day return policy. They are more likely to use the ‘default option’ which is, in this case, not acting at all, not returning the shoes and keeping (and buying) them.
So the larger part of the extra shoes that are ordered are kept and paid, resulting in an average 150% higher spending by Zappos customers. Instead of ordering just 3 and returning one, they are way more likely to order 7 to only return 1.

And yes, there is the famous 2% of the customers that will return their worn-out shoes after 364 days. But most consumers don’t because they feel the emotional commitment towards Zappos not to rip them off. The consumers who do return their products, usually return their shoes within 3 months (or even more likely – 30 days).

A smart combination of great customer service and leveraging the power of nudges to actually build a business case. Directly, via extra sales, and indirectly via the fact that a 365 day return policy these days still is pretty worth sharing.

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