Amazon’s speedy refunds set the pace for online product returns
January 12, 2015 04:15 PM
(Bloomberg) -- Amazon.com Inc. is known for its efforts to woo consumers with fast deliveries and vast product selection. It turns out the web retailer is just as assertive when it comes to refunds for returned merchandise.
The Seattle-based company takes 1.3 days on average to return cash, the quickest among online stores, according to new research from StellaService Inc., which tracks e-commerce data. While most web stores will only pay once a return parcel is on its way, Amazon offers instant refunds for some purchases, issuing immediate credit and 30 days to return a product.
Instead of tying up cash and preventing customers from buying other things, Amazon’s aim is to get people spending again. That’s especially critical during and after the annual holiday shopping season, when gift returns spike and consumers are predisposed to buy merchandise. Fast refunds are also important in Internet commerce because shoppers buy things they haven’t touched or tried, making return rates higher than in retail outlets.
“Amazon is killing it on refunds and others should follow suit,” said Eduardo Vilar, chief executive officer of Returnly Technologies Inc., a San Francisco company that researches retail returns. “Customers who are given the right experience on a return are more loyal shoppers.”
Amazon’s instant refund, which was rolled out quietly last year, gave the web retailer the fastest refund-processing time out of 40 companies measured by StellaService.
Lisa Draper, 53, of Coatesville, Pennsylvania, bought a laptop cover from Amazon as a Christmas gift for her son. After noticing a defect when it arrived, she went to Amazon’s website and clicked the return option. The money was credited the next day and she bought and received a replacement before he returned to school this month.
“I didn’t want to have to charge the item twice on my credit card,” Draper, who owns an electrical-contracting business, said. “I was not expecting to have the refund so quickly, and that was nice.”
After introducing instant refunds in early 2014, Amazon has gradually made it the default option for more returns during the year, according to Kevon Hills, director of research at New York-based StellaService. In the quarter that ended in September, Amazon customers requesting refunds had money credited to their accounts in just more than a day, three days faster than the same period in the previous year, he said.
“Other retailers are interested in getting faster, too,” Hills said. “The refund process is the last experience customers have with a retailer, and you don’t want it to be a bad experience.”
Kelly Cheeseman, a spokeswoman for Amazon, declined to comment on changes made to the company’s refund policies.
“Our goal is to make sure customers are satisfied with their experience with Amazon whether they are shopping or returning an item,” Cheeseman said.
Amazon’s closest competitors in refund-processing speed include online furniture and home goods retailer Wayfair Inc. and personal computer and printer-maker Hewlett-Packard Co., which both took about three days to issue refunds, according to StellaService. The average refund-processing time of the 40 companies tracked by the researcher was more than nine days.
“A lot of retailers want to put their energy into increasing sales and making more money, but you have to look at making your customers happy,” Niraj Shah, CEO of Boston-based Wayfair, No. 45 in the Internet Retailer 2014 Top 500 Guide, said in an interview. “That refund delay, even if we can explain it logically, it’s still emotionally frustrating.”
Sarah Pompei, a spokeswoman for Hewlett-Packard, didn’t respond to a request for comment.
StellaService said it measures the length of time it takes for cash or credit to appear in a shopper’s account after the request for a refund. Since banks and credit-card companies also play a part in the delay, the researcher uses the same card issuer for all transactions to make the tracking more accurate.
Amazon (No. 1), which will probably report earnings for the fourth quarter on or around Jan. 30, is projected to report that sales during the holiday shopping season climbed 16 percent to $29.7 billion, according to data compiled by Bloomberg.
As Amazon and other web retailers compete with brick-and- mortar stores, they’re projected to boost U.S. e-commerce spending to $494 billion by 2018, according to EMarketer Inc. Still, with no shops to offer immediate cash refunds or exchanges, Amazon is at a disadvantage to chains such Wal-Mart Stores Inc. (No. 4) and Target Corp. (No. 18), where people can return online purchases in physical stores.
While retailers have an incentive to bring people into stores and get them shopping, a fast e-commerce refund process provides an appealing alternative for consumers who would rather avoid long customer-service lines in stores.
“Getting a fast refund is important,” said Heather Dotson, 44, of Strawberry, Arizona, who said she returned snow boots to Amazon twice and was glad she didn’t have to wait for refunds for an item that cost $100. “That influences my shopping habits greatly.”