Internal inconsistency and the growth of social media likely contributed to an uptick in product returns at Recreational Equipment Inc. that prompted the retailer to kill its lifetime return policy last week.


REI announced that starting June 4, it would limit returns to one year from date of purchase, except at the companys online clearance outlet, where they must be returned within 30 days of purchase. 



The decision came after the company noticed an unusual increase in returns of merchandize more than a year old, said Senior Vice President of Retail Tim Spangler. He said an analysis revealed no obvious causes for the increase.



“The customers vary across a broad range of ages, broad ranges of membership tenure and the markets they live in,” Spangler told The B.O.S.S. Report. What’s behind the recent growth? I would probably point to things like social media and it being much easier to tell stories and share policies. Google “REI return policy” and you will find lots of interesting discussions.”



Until last week, REIs “100 percent customer satisfaction guarantee” placed no time limits on returns of items. The guarantee aimed to assure customers that if a product failed to meet their expectations, they could return it to REI for a refund rather than have to file a warranty claim with the manufacturer. The guarantee, which never covered ordinary wear and tear or damage caused by improper use, has been a core component of REIs brand proposition since its founding in 1938.



As was long evident from REI Garage Sales of returned merchandize, customers have long abused the policy by returning heavily worn hiking boots, roof racks with missing parts, back packs and tents worn by years of use. While rare, such abuse has for years prompted frustrated REI employees and co-op members to joke that REI stood for “Return Everything Inc.” or “Rental Equipment Inc” rather than Recreational Equipment Inc.



In rare occasions, REI would bar customers it determined were consistently abusing the policy. But until now, REI managers had insisted that the goodwill created by the policy outweighed any financial impact.



That calculus began to change in 2010, as more and more customers went online to share their experiences. Today social media sites and discussion boards are rife with posts from REI customers debating the intent of its return policy or even bragging about how they took advantage of it to get free use of a baby stroller, mountain bike or tent.



In the last three years the number of customers who were stretching the policy beyond its intent became material,” Spangler said. “We have to watch our profit carefully if we are going to pay our members a dividend every year and we were reaching a point where it was hard to do both.


In March, REI issued $104 million in patronage dividends, or about 10 percent of eligible purchases members made in 2012, when REI sales reached $1.93 billion in sales.  The 2012 dividends can be redeemed for cash from July 1 until Dec. 31, 2013 and used as store credit until Dec. 31, 2014.



Spangler said REI contributed to the problem by not explaining the intent of its satisfaction guarantee to store employees in a consistent manner. It was not uncommon to hear cashiers tell customers the guarantee meant they could return any product, at any time for any reason, no questions asked.


Certainly I never heard people use the term no questions asked 20 years ago, said Spangler.  We really pushed hard to align store teams around letting customer determine what satisfaction is and taking care of that customer. I wont tell your our execution was 100 percent consistent. We were inconsistent across our stores and we created some tough situations for customers.