As a picky pet parent and savvy consumer, you know how challenging it can be to find just the right food for your furry friend. Will they like the taste? Agree with their stomach? It often takes trial and error to land on a winner. That‘s why a flexible return policy is so crucial when shopping for pet supplies online. Enter Chewy – the ecommerce pet retailer renowned for their industry-leading 365-day return window and free return shipping on all items, even opened bags of food. Let‘s chew on what makes their policy best-in-show and how it‘s fueling their tremendous growth.
Chewy‘s Unmatched 365-Day Return Policy
Here are the highlights of Chewy‘s return policy:
- 365 days to return any item for a full refund, no matter the reason
- Free return shipping on all orders
- Covers opened and used products, including pet food
- Refund processed within 3-5 business days of return receipt
- 100% unconditional satisfaction guarantee
"Our return policy is a key differentiator for Chewy and a major driver of customer loyalty," said Sumit Singh, CEO of Chewy, in a recent earnings call. "We offer the most generous and customer-friendly policy in the industry because we know earning trust is essential to retaining pet parents for the long term."
Chewy‘s commitment to hassle-free returns, even on opened products, is unparalleled among major pet retailers. Competitors like Petco and PetSmart only allow returns on opened food for 30-60 days, while online giant Amazon doesn‘t accept opened food returns at all.
The Financial Impact of Easy Returns
A lenient return policy does come with financial risk for retailers. A 2021 study by the National Retail Federation found that over $761 billion in merchandise was returned by consumers, accounting for 16.6% of total retail sales. For online purchases, the return rate jumps to 20.8%.
However, Chewy views their return policy as an investment that pays dividends over time. By reducing friction and building trust with shoppers, they aim to boost customer retention, repeat purchases, and positive word-of-mouth.
"Chewy‘s return policy is a key part of their growth strategy," said Seth Basham, Managing Director of Equity Research at Wedbush Securities. "They‘re willing to absorb the upfront loss on returns to create lifelong customers. It‘s a smart long-term play that‘s clearly working based on their consistently strong sales numbers."
Source: Chewy.com
Indeed, Chewy has posted impressive revenue growth every year since they launched in 2011. Net sales reached $8.9 billion in 2021, a 24% increase from 2020. Active customers also grew by 7.6% to 20.6 million. Chewy is significantly outpacing the overall pet industry, which expands at an average rate of 5% per year.
Mining Returns for Valuable Customer Data
For Chewy, returns aren‘t just a sunk cost – they‘re an opportunity to gather insightful data on customer preferences and product quality. Every return initiated prompts the customer to provide a reason, giving Chewy a continuous feedback loop to improve their offerings.
"We leverage our return data in multiple ways across the organization," said Singh. "It helps inform our merchandising decisions, vendor partnerships, product development, and personalized marketing efforts. Returns are a goldmine of actionable insights."
This data-driven approach enables Chewy to curate a more relevant selection for each customer and proactively suggest new items to try after a return. For example, if a cat owner returns a particular brand of kibble, Chewy may recommend a similar formula with higher ratings to help them find a better fit.
The Psychology of Returns and Customer Loyalty
Hassle-free returns don‘t just make customers happy in the short-term – they foster long-term loyalty. A 2019 UPS study found that 73% of shoppers say a positive return experience influences whether they will repurchase from a retailer. Conversely, 68% say they would be deterred by having to pay return shipping fees.
"By offering free and easy returns, Chewy reduces the risk and uncertainty of trying new products," said consumer psychologist Dr. Cathrine Jansson-Boyd. "This creates a sense of confidence and trust with the brand, leading to higher repurchase intent and customer lifetime value."
Chewy‘s internal data shows that customers who return an item within their first year spend over 50% more in their second year compared to those who don‘t make a return. This suggests that a positive return experience actually encourages shoppers to buy more in the future.
Mitigating the Risks of a Liberal Return Policy
Of course, there are some potential downsides to accepting returns on opened food. Chewy has to be diligent about preventing return fraud and abuse, such as customers over-ordering food with the intent to use most of it and then return the last bit for a refund.
To combat this, Chewy has invested heavily in data analytics and machine learning to detect suspicious return patterns. They also require returns to be initiated within a specific timeframe and assess restocking fees for excessive returns.
"We closely monitor our return rates and have safeguards in place to identify and address any misuse of our policy," said Singh. "Protecting our bottom line is a top priority, but we will always err on the side of the customer to preserve a best-in-class experience."
Another risk is that accepting open box returns could signal a lack of quality to some shoppers. After all, if so many people are returning a product, is it really that good?
Chewy combats this perception by prominently displaying customer ratings and reviews on every product page. Shoppers can easily see the percentage of reviewers who would recommend each item to a friend. This social proof provides an authentic window into product quality and offsets potential concerns from seeing a generous return policy.
The Halo Effect of Great Customer Service
Beyond the return policy itself, Chewy has cultivated a reputation for exceptional customer service across every touchpoint. Tales of their above-and-beyond gestures have reached legendary status among pet parents. Some heartwarming examples:
- Chewy sent a pet parent a handwritten note and oil painting of her dog after the pup passed away
- A Chewy rep personally delivered food to a customer‘s hungry cats after a late shipment was further delayed by a hurricane
- Chewy mailed a customer a refund check after she accidentally typed the wrong price on a gift card
These extraordinary acts of empathy and kindness generate massive positive sentiment on social media and beyond. Coupled with the flexible return policy, they create a halo effect that elevates Chewy‘s brand image in the eyes of consumers.
"Chewy‘s customer service is really what sets them apart in such a competitive industry," said Basham. "The return policy is just one component of an overall commitment to creating wow moments for pet parents. That‘s what keeps shoppers loyal even if they experience an issue along the way."
Teaching an Old Industry New Tricks
Before ecommerce players like Chewy arrived on the scene, pet parents had limited options for where to buy food and supplies. Big box retailers offered a decent selection but mediocre service and restrictive return policies. Neighborhood pet shops provided a more personalized experience but couldn‘t compete on price or breadth of products.
Chewy has upended the industry by combining the best of both worlds – a massive selection, competitive pricing, speedy delivery, and a customer-centric ethos. Their 365-day return policy is emblematic of this new breed of pet retail, where the focus is on earning loyalty through convenience and flexibility.
As Chewy continues to grab market share and perfect their model, expect other industry players to follow suit. Petco and PetSmart have already begun expanding their return windows and investing more in the online shopping experience. Even Amazon has taken notice, launching their own private label pet food brand called Wag in 2018.
Still, it will be tough for any retailer to match the level of trust and goodwill Chewy has fostered with pet parents over the past decade. As long as they continue to offer unparalleled service and a jaw-dropping return policy, Chewy is poised to maintain best-in-show status for years to come.