In Hong Kong, sports goods retailer Decathlon is offering members of its customer loyalty program free lifetime returns – and the numbers suggest the bold risk is paying off.
The policy was decided on by Decathlon’s senior Hong Kong management as something special to the market, very much an outlier for the group internationally. In most markets around the world, the French headquartered retail giant mandates a year limit for returning goods, but in Hong Kong, the retailer sees the policy as a key plank in building customer loyalty.
“It’s kind of like a selling point … to give customer confidence in our products,” Kent Lam, head of technology at Decathlon Hong Kong, said in an exclusive interview with Inside Retail. “We see that people don’t really abuse it.”
Free returns are available only to members of Decathlon Hong Kong’s loyalty program, which records all members’ transactions. It takes just a minute to sign up with any purchase and a significant majority of local customers are members.
Lifetime, said Lam, means “pretty much forever”. “If you bought something five years ago, when you bring it back – unless the product is obviously disintegrated – we will let you return it with good reason.”
An example would be a customer who bought home exercise equipment during the Covid-19 pandemic and found the bench uncomfortable for their back.
“We try to strive for customer satisfaction, so if a customer complains about a product, or is not happy with certain things, we do whatever we can to satisfy them. But obviously, the product has to still be in good condition, it cannot be very worn.”
Depending on their condition, returned products are typically resold or if not resaleable given away to charity.
The company has worked to optimise the automation of the returns process across its eight stores in the territory and online – something Lam said was made possible when the chain integrated its point of sale and payment services under a single provider, Adyen. A previously manually-driven process enabled occasional human errors in refund processing and opened the door to fraudsters.
“The refund process before was completely isolated, and manual. So when someone came in for a refund, the teammate would have to manually look up that transaction in our system to match a transaction, verify that the person had bought it, and then issue a refund on a separate terminal. That process can lead to mistakes because it’s not automatically matching the transaction.”
It also encouraged fraudsters, with one customer in late 2022 having fleeced at least HKD100,000 (US$13,000) from Decathlon over a period of several months using the old system. (The money was recovered when the offender had a wave of remorse and transferred it back).
In 2022, before the company moved to Adyen, returns amounted to the equivalent of about 5 per cent of total sales. In the six months post-migration, that figure dropped to 4 per cent, meaning 1 per cent was effectively added to the bottom line.
Lam believes the difference could be attributed to fraudulent refunds or staff errors. “That’s my guess, but there’s no way to prove it.”
This year the percentage is somewhere between 3 and 4 per cent. “At this point, [the lifetime returns policy] doesn’t eat into our profit that much. So we’ll continue to offer it.”
Lam said the length of the return window makes little difference operationally, but the ability to accurately verify returns before issuing refunds does.
“When someone comes in to show the receipt, we scan the receipt, and then the system automatically finds the transaction and makes the refund back to the original credit card.”
Now a staff member can go to any terminal and issue the refund back to the customer and it is all tracked and locked in the system so the potential for mistakes is minimised, he said.
While having a receipt speeds up the process, many people don’t retain them for long. In that case, the purchase is tracked through the membership program.
The customer is asked for a quick reason why they want to return the product. If the card used to purchase the product is no longer valid, Decathlon will refund to another, but Lam said that course is avoided wherever possible. Gift cards are preferred to refunding cash, but all options are on the table.
While the Hong Kong experiment is clearly paying off – the combination of digitalisation efficiency and enhanced customer confidence – Lam said there is no certainty it will be rolled out in other markets.
“Each country’s CEO comes up with their own policy, so… it doesn’t mean that we can persuade other countries to do the same thing.”
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