Eli Schwartz

Many Westerners and especially people from the US are surprised to learn that most retailers in Asia do not accept returns and there are very limited exchange policies. Essentially, when you make a decision to purchase a product, it’s a final sale and barring outright fraud (in countries that have consumer protection), there is no way to get your money back if you change your mind.

I found this particularly jarring only a few days after arriving in Singapore when I purchased a new mobile phone. The retail salesperson was very clear that there was no warranty, and once I inspected the phone after payment the deal was done. This was very unlike the long return policies even on electronics that I was used to at American retailers like Best Buy, Walmart and Costco.

I have discussed the need to always make final purchases, even on high ticket items, with many different people around Asia and most people believe that if retailers accepted returns, consumers would take advantage of them. I have no doubt that this is true, as people in America most certainly return things after using them, but I think the lack of returns actually hurts businesses more than it protects them. The same people that were convinced that flexible return policies would be the end of retailers in Asia also agreed that a lack of a return policy made them less likely to make impulsive purchases.

Researchers at the University of Texas at Dallas analyzed the effects of return policies on purchase decisions and discovered that the value vs cost decision was quicker when the consumer felt like there did not need to be a strong commitment. Furthermore, once the purchase is made, the return becomes less likely as a result of the “endowment effect.” This theory from psychology simply states that people assign a higher value to something once it is already in their possession.

The research published in the Journal of Retailing stated

“Our supposition is that a longer period, i.e. a more lenient policy along the time dimension, reduces the urgency a consumer feels to make a return and thus the act of making a return can be delayed. ‘However, the longer a consumer remains in possession of the product the more salient their possession of the item becomes relative to their dissatisfaction with some aspect of the product, i.e. the reason they want to return the product in the first place. ‘It is surmised that this is due to an individual’s aversion to loss; that is, people dislike the prospect of losing something they possess so much so that they overvalue an item simply because it is currently in their possession.”

If this research is to be believed, retailers in Asia that refuse to accept returns are actually hurting themselves. Accepting returns will lead to higher revenue and less returns than they fear. As an added benefit, a flexible return policy might even be boon to customer loyalty.