Retailers are making returns harder. A carpet seller taught me why that’s a mistake | Gene Marks
A standard business practice offsets future costs by funding a reserve for returns – but many small businesses don’t do it In my 30-plus years of being an accountant I have learned many business lessons from people who were much smarter than me. Jerry Crawford was one of those people. Jerry taught me about product returns. Jerry – who sadly passed away a decade ago – sold carpets wholesale from a…
Successful business owners often create reserves for future costs, including returns – but many small companies fail to follow this practice. Jerry Crawford, a carpet wholesaler, taught this lesson to the author during his 30-plus year career. Crawford sold carpets from a small building in South Jersey, employing around 50 people and serving numerous local and national retailers. In reviewing Crawford’s books, the author noticed a significant reserve for "returns."
Crawford explained that reserves are created for potential future costs, like bad debts, aging inventory, and returns. He built a reserve to cover the costs associated with customer returns, a common occurrence in business. While some major companies like Amazon adopt this practice, many small businesses, including Crawford’s, still struggle with it.
According to the Wall Street Journal, consumers are complaining about the difficulties in returning items, including surprise fees, shorter return windows, and more stringent return criteria. Some customers even receive warnings about potential non-refundability of future purchases.
Crawford believed that creating obstacles and charging customers for returns generates animosity, diminishes loyalty, and leads to unfavorable press. Despite the widespread knowledge of this practice, he wondered why retailers continue to make the same mistakes. The author concludes that businesses that keep customers satisfied, build loyalty, and grow their operations by not nickel-and-diming them, should learn from successful practices like Crawford’s.
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