REI has finally decided to adjust its return policy, which has achieved notoriety among gear hungry consumers who often refer to the retail chain as “Return Everything Inc.” and “Rental Equipment Inc.”. Until now, the policy allowed REI members and customers to return any piece of gear purchased in-store or online at any time—now or thirty years down the road—for a full refund, no-questions-asked.
The new policy will limit returns on store items to a year after purchase, and 30 days for outlet merchandise purchased on REI.com. The company says its stores will also be stricter about proof of purchase to prevent abuse and fraud. With this being said, the retail chain is still at the liberal end of the spectrum; Target and Walmart give their customers 90 days to return most items.
The adjustment is a response to the fact that REI's previous no-questions-asked return policy enabled a subtle trend in “refreshing gear” or returning purchases as a means of upgrading or replacing used gear at little or no cost to the consumer. For example Costco, who began to limit returns several years back, reported that its liberal return policy had become a free TV upgrade program, with customers taking back TVs once newer, cheaper models went on sale.
In the June issue, Outdoor USA Magazine published a feature where specialty retailers shared how REI and Backcountry.com “no-questions-asked” return polices are impacting their business. It looks like in the case of REI, independent stores weren't the only ones affected.
As Outdoor USA Magazine reported in April, REI's sales over the last year were less than expected rising 7% to $1.9 billion, compared to 8% growth in 2011 and 14% in 2010. Also profits dropped 4%, down to $29 million at the end of 2012. In March, the outdoor-gear chain laid off an undisclosed number of employees from its Kent, Wash. headquarters citing changing business needs. Although the numbers do not show a relationship between the abuse of REI's return policy and sales, the decision to adjust the policy comes at a time when the business itself isn't performing as well as in previous years.
While the company claims 90 percent of its returns occur within a year of purchase, a significant increase in returns after the year-mark was being observed with some concern. REI Vice President of Retail Tim Spangler told the Seattle Business Journal, “What we found is that a small group of folks who are probably extending the policy beyond its intent, is getting bigger. And It’s not a sustainable thing in the long-term...”
It is clear that REI felt the growing number of returns likely attributed to gear refreshing would adversely affect its business over time, enough to re-evaluate its return policy. The next question is will Backcountry.com—who offers an almost identical no-questions-asked policy to that offered by REI—update its position on returns or try to maintain a competitive advantage, despite potential abuse.