Why Making Returns Harder Can Backfire for Retailers

Retailers across the country are tightening return policies, betting that friction will reduce refund volume and protect margins. But a decades-old lesson from a New Jersey carpet wholesaler suggests the strategy may be shortsighted.

Gene Marks, a small business accountant with more than 30 years of experience, recalls a client named Jerry Crawford who ran a wholesale carpet operation out of a modest building in south Jersey with roughly 50 employees. When Marks reviewed Crawford's financial records, he found a conspicuously large reserve line item dedicated to product returns — a detail that stood out against the otherwise lean operation.

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The practice Crawford followed is a recognized accounting principle: businesses set aside a cash reserve to absorb the future cost of returns rather than absorbing those hits as surprise expenses. The approach smooths out financial volatility and forces business owners to treat returns as a predictable cost of doing business rather than an exception to be punished or avoided.

Many small businesses, however, skip this step entirely. Without a funded reserve, every returned item becomes an unplanned expense that strains cash flow and tempts owners to respond by making returns harder for customers — a policy shift that can damage loyalty and long-term revenue more than the returns themselves ever would.

The broader retail industry's growing hostility toward returns, from restocking fees to shortened windows and required receipts, reflects that same reactive thinking Crawford's model sought to prevent. Marks argues that the smarter financial discipline is not to punish customers for returning products, but to anticipate and budget for returns as a normal cost embedded in the business model. Continue reading at Business | The Guardian.