Customer Service

Return on relationship: Why your return policy might be your strongest loyalty tool

In today's retail environment, returns shouldn't be viewed merely as a cost of doing business. When strategically designed and leveraged, they become powerful tools for building meaningful, lasting customer relationships.

Photo: Generated by AI. Adobe Stock.

August 1, 2025 by Marie DeLeo — Director, Strategic Consulting, Kobie

Smart retailers are finding customer loyalty can be cultivated in unexpected places — particularly in moments traditionally seen as challenging for the consumer.

While returns have typically been looked at as a "necessary evil" that erodes margins and complicates inventory management, they now represent an opportunity for customer relationship and loyalty building with the right approach.

The shifting landscape of customer expectations

The data tells a compelling story: return rates have doubled in just five years, reaching approximately 17% in 2024, with holiday periods seeing the biggest increases. This trend reflects evolving consumer expectations, where seamless return experiences have transformed from pleasant surprises into baseline requirements.

For today's shoppers, the return process can be a make-it or break-it part of the shopping experience, with 76% citing free returns as a critical factor in choosing where to shop. Even more telling, 67% would completely abandon a retailer after a single negative return experience. The message couldn't be clearer: your return policy isn't just an operational footnote — it's a cornerstone of your customer relationship strategy.

The overlooked connection between returns and loyalty

Despite recognizing the importance of returns — with two-thirds of retailers planning policy enhancements — there's still a disconnect. Few companies have effectively integrated their return processes into their loyalty frameworks, and even fewer are properly communicating these benefits to program members.

This represents a substantial missed opportunity. By reframing returns as relationship-building moments rather than cost centers, retailers can convert potential pain points into powerful competitive advantages, strengthening the bonds with their most valuable customers.

Building stronger relationships through strategic return policies

These are some innovative ways to leverage returns as loyalty drivers:

Elevate the experience for your best customers: Top-tier loyalty members expect premium treatment across every touch point. Extended return windows, expedited refund processing, and hassle-free, receipt-free returns can transform a routine transaction into a loyalty-affirming experience. By positioning enhanced returns as a premium benefit, retailers simultaneously reward high-value customers and create compelling incentives for program advancement.

Create return moments beyond the holidays: While extended holiday return periods are standard practice, savvy retailers recognize opportunities to create additional "return with ease" events throughout the year. Aligning these with key shopping moments — back-to-school season, summer promotions, or major online sales — keeps loyalty members engaged year-round while reinforcing the ongoing value of program membership.

Differentiate through cardholder-exclusive benefits: Store credit cards can deliver more than traditional perks like discounts and financing options. Return-specific benefits — such as complimentary return shipping or bonus points when exchanges are selected over refunds — can drive card usage while keeping customers shopping within the ecosystem.

Learning from market leaders to set loyalty programs apart

While many retailers already offer free returns, many aren't extending the benefits to their most loyal members.

As an example, Nordstrom has built its reputation on a customer-first philosophy, offering universally free returns without time constraints — a policy that naturally fosters loyalty. To take this one step further, they might consider offering exclusive returns perks specifically for Nordy Club members, deepening the brand loyalty these customers have even further.

Other retailers have already integrated returns directly into their loyalty strategy. Target offers RedCard holders an additional 30 days for most returns, while REI Co-Op members enjoy an impressive 365-day return window — tangible benefits that make program membership significantly more valuable.

However, even retailers with robust return policies often fail to effectively market these advantages, leaving members unaware of their benefits. This represents a significant opportunity for brands willing to elevate and promote their post-purchase experience as a loyalty differentiator.

Maximizing your return on relationship

While retailers have invested heavily in optimizing the pre-purchase journey and checkout experience, the post-purchase phase — including returns — deserves equal strategic attention. These touch points profoundly impact brand perception and long-term customer value, creating lasting impressions that influence future purchasing decisions.

The most effective return policies don't simply meet expectations — they exceed them in ways that reinforce the value of brand loyalty. In today's retail environment, where every interaction shapes the customer relationship, returns shouldn't be viewed merely as a cost of doing business. When strategically designed and properly leveraged, they become powerful tools for building the meaningful, lasting relationships that drive sustainable growth.

About Marie DeLeo

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