Image: © George Redgrave via Flickr

Shops are making it harder to get refunds

They're trying to thwart shoppers who game the current system.

Transactions between buyers and sellers are theoretically very easy. The seller offer the buyer a certain thing at a certain price, and if they buyer wants that thing at that price, they purchase it. But what should happen if the buyer later decides they don’t want the product after all?

In countries like the UK, the government insists that the seller has to refund the buyer’s money if “the item is faulty, not as described or doesn’t do what it’s supposed to do”. That’s to protect consumers from being victims of what economists call “asymmetric information”, where one party in an economic transaction knows more than the other (like that the good they’re selling is crap).

Why do governments bother to do this? Well, most consumers are also voters, so it pays to be seen to be sticking up for them. And people are also more likely to consume more stuff if they have a government guarantee that they won’t be screwed over by the seller. Greater consumption means more work for businesses, which means more people being employed by these businesses, both of which push up economic growth. These are all things most governments - rightly or wrongly - see as beneficial.

But what if there’s nothing wrong with the item, but the buyer has changed their mind about owning it? Even though they don’t have to by law, many businesses will still offer a refund as long as the product is returned unused and with a receipt. The bet they're making is they will get more custom and money overall from people if they give them what they want (and make it seem more low-stakes to buy stuff in the first place) than if they refused to refund unwanted items.

Such policies can be - are often are - taken advantage of, though. For example, almost a third of shoppers say they buy clothing with the intention of wearing it and then returning it. In response, one in five businesses say they’re now making their returns policies stricter. Whether this will cause them problems amongst their honest customers remains to be seen: half of shoppers say returns policy influences where they’ll shop.

Read our explainer on: the driving purpose of a firm.

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