MIT Sloan Management Review Article on A More Profitable Approach to Product Returns

By studying consumers’ transaction patterns and tailoring return policies accordingly, companies can prevent a major drain on profits while increasing engagement with loyal customers.

For a century, L.L. Bean had an extremely liberal product-return policy, with no time limit and no receipt requirement. You could get a full refund for boots purchased decades ago. But many people abused the policy, returning products fished from dumpsters or bought used on eBay. Over the past five years, worthless returns cost L.L. Bean $50 million per year. That amounts to roughly 30% of the company’s annual profits.