L.L. Bean pulls the plug on lifetime return policy

Dive Brief:

L.L. Bean last week stunned customers with the reversal of its longstanding liberal return policy for used or damaged merchandise, according to a letter to customers from Executive Chairman Shawn Gorman. Under the new policy, customers will have one year after purchasing an item to return it, accompanied by proof of purchase. The company will work with customers "to reach a fair solution" if a product that is a year old or older turns out to be defective.
Previously, the retailer would accept most returns, even after years, with or without a receipt, in exchange for a new iteration of the same item, the most comparable item in the store or a gift card reflecting the last known price of the return. But in the age of social media and retail arbitrage, that policy was being abused 15% of the time, CEO Stephen Smith told the Portland Press Herald — double the rate a few years ago.
The company is also ending its 17-year-old no-minimum free shipping policy, instead requiring a minimum $50 purchase to encourage larger orders. L.L. Bean credit card holders will continue to enjoy free shipping on all orders; others will pay $6 for orders under $50, according to the company's website.

Dive Insight:

Retailers like Nordstrom and L.L. Bean forged a unique facet of trust with their customers with return policies that have entered the realm of mythology, with many more customers aware of their willingness to accept dubious returns than actually taking advantage of it. (Nordstrom is so famous for its liberal return policy that its greatest customer-service myth — that they'll take back snow tires they've never sold — is actually true. Well, close enough: In the 1970s, the company bought a store in Alaska that once included a tire retailer. When a customer brought back tires, Nordstrom figured he had bought them there and allowed the return.)

Clearly, at that moment, Nordstrom lost money on the deal. After all, it honored a return on an item it didn't even sell. Then again, the company has been feasting off the good public relations of that event since 1975. The web has only made it more viral; there's even an entry on Snopes.com explaining how it's true. For the price of a set of snow tires, the retailer bought itself decades of good will.

But there may have been, until now, no retailer more liberal than L.L. Bean, whose clerks asked few questions even when confronted by lift-ticketed parkas, holey slippers or stained shirts. Once upon a time L.L. Bean’s famous guarantee was really a free boot repair service, but as its assortment expanded and increasingly included merchandise made overseas, the retailer would offer exchanges or store credit when customers returned their goods.

That had customers bringing in items that were tattered rather than defective, and, to maintain its reputation for unflappable customer service and stand by its quality guarantee, store clerks accepted them. But the good will has apparently become too expensive, and the brand had little choice, according to Brandon M. Weaver, Managing Director of Brand Experience at BLKBOX. "As the retail landscape becomes increasingly competitive and retailer margins continue to shrink as a result of new entrants into the market L.L. Bean was likely forced to look at the opportunity cost of having such a liberal policy in place," he said in an email to Retail Dive, noting that, as a legacy catalog retailer with a major e-commerce operation, managing fulfillment costs is increasingly important.

With the help of social media and online resale sites like eBay, "a small, but growing number of customers has been interpreting our guarantee well beyond its original intent," Gorman said in his letter. "Some view it as a lifetime product replacement program, expecting refunds for heavily worn products used over many years. Others seek refunds for products that have been purchased through third parties, such as at yard sales."

But data from such activity likely helped L.L. Bean pinpoint the issue, according to Weaver. "Technology certainly added transparency to the process and likely made spotting the problem easier," he said. "Improved inventory tracking and quality control systems likely had something to do with the company realizing that at some stores up to 70% of the items earmarked for returns were of questionable nature."

The change to L.L. Bean's shipping policy is also understandable. Shipping costs are rising — Amazon is apparently solving that problem by running its own shipping business — and the retailer hopes to mitigate that by encouraging larger orders, according to the Press Herald.