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Jack Grace’s playbook for reducing the cost of ecommerce returns

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As chief operations officer for Jack Grace, a seller of golf shoes and shoe saddles, Brad Smith thinks about returns — a lot.

As we said last week, his key conclusion is that returns — including fraudulent returns — are the cost of providing a great customer experience. But he’s not advocating giving away the store. In the brief video below, Smith lays out his straightforward approach to getting a handle on return costs.

The potential reward for carefully reviewing a retailer’s return process is huge. Some verticals, including Smith’s apparel category, see returns run as high as 30 percent of orders.

That said, Smith’s strategy might sound simpler than it is. But it strikes me that it is a necessary corollary to his conviction that online merchants have to open themselves up to risk in order to properly serve their legitimate customers who would never take advantage of a retailer they enjoy shopping with.

Skull Candy was a return learning experience

Smith reached his conclusion early in his career, when he was working for headphone maker Skull Candy, which had about 20 employees at the time.

Its policy then — and today — was to replace headphones that were broken or malfunctioning. Smith explained in our longer conversation that when damaged headphones would come in, the Skull Candy team would process the return and throw the broken headphones in the dumpster out back.

“We soon realized,” he continued, “that there were kids out at the dumpster, diving in, finding our broken products and brining them into the office and saying, ‘Here. I broke my headphones. We then figured out not to throw things in the dumpster.”

And that’s his point today: Yes, some people will try to take advantage of you, and yes, it’s infuriating. But that doesn’t mean you should treat every customer like a criminal.

“It’s figuring out what is the cost of fraud,” he says, speaking of return abuse, “and how do you reduce it in a way without necessarily alienating the customers that are actually paying your bills.”

For Skull Candy, one way of handling that was by putting a stop to the practice of tossing broken products into an easily accessible dumpster. It was not by making it harder for all customers to return products when something went wrong.

Returns can help make a brand

“Our warranty process was integral to the life of our brand,” he said. “We were generous. We were positive. We gave away product sometimes to kids that were dumpster diving. But at the same time, the customer out there that broke their headphones, that something happened, that something failed, they knew that we were going to stand behind our product, and therefore, they were more likely to buy again.”

And in the end, that’s literally the bottom line, when it comes to customer experience.

Contact Mike Cassidy at [email protected]; follow him on Twitter at @mikecassidy.

Mike Cassidy

Mike Cassidy

Mike is the head of storytelling at Signifyd. A former journalist and a retail geek, he covers ecommerce and the way technology is transforming digital commerce. Contact him at [email protected].