Maine retailer L.L. Bean has been known for its extremely generous product return policy, with no time limit and no receipt requirement. Customers could get a full refund for items purchased decades ago. But in February 2018, citing the policy's negative impact on profits, the company announced a new return policy that limited product returns to one year from the date of purchase. Other retailers, including Best Buy, REI, Lands' End, and Costco, are also tightening their return policies. As the authors explain, new tools and technologies allow companies to segment customers and impose strict return policies only on the ones whose past behavior warrants it. They analyzed customer data for a large, high-end U.S. retailer with more than 100 brick-and-mortar properties, discount outlets, and catalog and online sales channels. Using data from more than 1 million customers and more than 75 million transactions over seven years, they identified transactional patterns showing which people are most likely to abuse return policies. Based on their data, the researchers found seven variables that collectively explained the variance in overall customer profitability. By analyzing transactional behaviors and segmenting customers according to profitability, the authors explain, retailers can figure out when to impose and when not to impose return restrictions.
