Building customer loyalty and managing costs with opened item return policies

It would be ideal if all product returns came back wrapped in their original packaging—but unfortunately, that’s rarely the case. Many of your returned items will be “open box” items, whether that simply means they’ve been removed from their packaging, or that they’ve already seen moderate or significant use before the customer chose to send them back.

As a merchant, it’s important to put return policies in place that are adapted for the not-so-pretty reality of how customers return products. Let’s take a look at how retailers manage open box returns, and what you can do to create customer-friendly policies that still protect your profit margins.

What are open box returns?

Open box returns are exactly what they sound like: Returns in which the customer has opened the box or packaging, and then decided to return the item.

That may happen for any reason, including products that are defective or don’t work as advertised. Often, there’s nothing wrong with the item—the customer simply decided they didn’t want it after all, or they preferred a different size, style, or model.

Open box returns may be in brand-new condition, or they may show signs of use. They may function perfectly, or they may have been sent back due to technical issues. But in any case, it’s unlikely that you’ll be able to resell the product for its original retail value after it’s been returned as an open box item.

That means it’s important to build customized return policies that account for the likelihood of receiving open box items.

What happens to open box returns?

If a returned product is still in its original packaging, you’ll be able to simply return it to your warehouse shelves for restocking and resale. But if the product is an “open box” item, it’s important to inspect the product for damage and defects, and determine whether it works as intended.

If the item has no issues, you’ll be able to restock and resell the product as an “open box” item, typically for a discount of around 20%. If it does have defects or problems, you may need to resell the item to a third-party liquidator or refurbishment company, where they’ll be able to fix up the item and resell it for a profit. Or, in the worst case scenario, an open box purchase may no longer be in resale condition under any circumstances, and may need to be disposed of.

In most cases, open box items won’t allow you to recoup the full value of the original purchase price—so how should you account for that in your returns policy?

How to handle open box returns

There are many ways to handle open box returns, and each retailer’s decision will come down to how they balance delivering a great customer experience against protecting their profit margins.

Let’s take a look at some common forms of returns policies for open box items:

• Flexible policiesSome brands will accept open box items for a full refund, as long as they’re returned within the merchant’s standard returns window. That may even be the case when there is no likelihood of reselling the product: Sephora, for example, accepts opened beauty products for a full refund within 30 days, giving the shopper the opportunity to test out the product and see if they like it. The outdoors retailer L.L. Bean is famous for the lifetime warranty they used to offer on all products; though they’ve now limited their returns policy to one year, products can be returned for a full refund during that window regardless of their condition. 
• Conditional returnsIn some cases, brands will only accept returns of items that have been removed from their original packaging if there’s something wrong with the item. While most brands are more lenient and will accept returns for any reason for a set period of time, certain product types, such as software and digital media, health items (i.e. headphones), and customized items, are typically only returnable for a refund if there is a defect or issue. 
• Exchanges or store creditSome brands don’t provide a full refund for open box returns, whether in general or after a certain date, but they are willing to provide store credit to put towards an exchange to ensure customer satisfaction. For instance, Victoria’s Secret accepts returns on products in their original packaging for a refund for 30 days; after that point, you’ll only be able to exchange the product for another item.

Optimizing costs on open box returns

However stringent your policies around open box returns are, you have opportunities to protect your brand’s profit margins in managing reverse logistics.

Here are a few ways to handle open box returns sustainably:

• Offer “keep item”For open box returns that you know you won’t be able to resell, it’s often more cost-effective to encourage the customer to keep the item, while receiving the refund or exchange credit at the same time. This will save your brand from paying for return shipping and restocking fees for a product that could ultimately end up in a landfill, while ensuring the shopper has a great returns experience.
• Partner with donation, recycling, and refurbishment centersOnce you’ve determined an item’s condition, you can properly route the return based on the most logical outcome. For returns that can be resold, you can ship them back to your warehouse—but if an item needs to be repaired first, it can go to a refurbishment center. If it can no longer be sold in its current form, it can be sent to a donation or recycling center. By using an automation-driven returns management solution, you can automatically route the item to the correct location, based on variables such as item category and condition. Loop’s integration with Poshmark allows shoppers to easily post non-returnable items for resale on Poshmark, allowing them to easily recoup costs and extend the life of the item.
• Create a branded secondary marketplaceBy encouraging shoppers to send back their pre-worn merchandise, you can create a secondary market for your gently-used goods at a lower price point to appeal to a more diverse array of shoppers. Loop offers integrations with Trove and ReCurate, which can market your products on a secondary branded website and give your brand a share of the resulting profits.
• Be more generous with exchanges than refundsSome brands would rather not provide refunds for open box merchandise, and that’s okay. In that case, consider offering exchanges for the open box items. They can take advantage of an Instant Exchange, or with Loop’s Shop Now & Later tools, they can choose to apply their credit towards any item in your available inventory, or save the credit for a later date. You’ll be able to keep customers happy, and encourage higher retention rates, by facilitating easy exchanges.

With the right strategy in place for managing open box returns, you’ll be able to build your brand sustainably and boost customer retention.

Ready to build a best-in-class returns program? Book a demo of Loop today.