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Friday 25 February 2005

Doing The Unthinkable

The Headline on Forbes.com is ‘Sears, Roebuck does the unthinkable’, and I think that’s about right. Sears is changing its 119-year-old customer-satisfaction policy from ‘Satisfaction guaranteed or your money back’ to ‘Satisfaction guaranteed or your money back within 90 days’. (There’s a slightly longer version of the same story in the Sun-Times.)

Hint to corporate management everywhere: when Forbes describes some decision of yours as ‘the unthinkable’, you might want to reconsider it, or at least issue a press release. Sears has, as near as I can tell, done neither.

Now, from a customer-service point of view this change is actually probably a good one. The old policy wasn’t exactly unlimited: goods had to be returned ‘within a reasonable time’. What the heck is ‘reasonable’? That would depend on what you’d bought, on how it had failed to satisfy you, on your motivation for returning it, on the mood of Sears’ employees, and a whole lot of other things. Ninety days certainly seems ‘reasonable’ to me; it’s a more-generous policy than most retailers have.

(I assume that this change doesn’t apply to Sears’ hand tools; Craftsman tools are some of the most expensive that you can buy in retail stores, and even cheap tools from Auto Zone are guaranteed for life. The craftsman.com website still explicitly mentions the lifetime guarantee, but the standard Sears guarantee page doesn’t mention any exceptions to the 90-day policy. If they’ve changed the guarantee on the tools, forget it: sell your Sears stock now, because they’ve just ceded their position as America’s #1 tool seller.)

I can see two reasons to change the guarantee: One is to avoid liability. Imagine that two people, at different Sears stores, both try to return the same item, purchased on the same day, etc., etc. At one store, the management decides that the return is being made within a ‘reasonable’ time. At the other store, the management refuses the return.

Now imagine that the person whose return is refused is a member of one or more Victim Groups, and has a lawyer who’ll work on contingency on speed-dial. It doesn’t matter why the return was refused, or what happened, or anything like that: this would cost Sears millions of dollars just in legal fees and a big settlement payout: never mind the damage to its reputation and the potential corporate ruin that could result should such a thing get certified as a class action.

Second: with the unconditional guarantee, every dollar of retail revenue that Sears brings in also generates a dollar of liability: and this liability isn’t something that Sears can ever write off, because everything is, at least in theory, guaranteed forever. After more than a century, I’m sure that Sears has a pretty good idea of just how much stuff is going to be returned, and when, and that they discount their satisfaction-guarantee liability accordingly, but there’s a not-insignificant cost involved in keeping track of all that. Now they’ll be able to fully book all their retail revenue after 90 days, and they’ll have a minutely-simpler balance sheet to show the Wall Street analysts.

But whatever the accounting or customer service impact, from a PR perspective this is a disaster.


Every Sears store has, at at least one entrance, a plaque next to the door or gold-leaf letters on the glass above it, reading ‘Satisfaction guaranteed or your money back’. (Click on that picture to pop up a bigger version.)

These will have to be removed or amended, and God help them if some newspaper gets a photo of someone prying one of those plaques off the wall. That the substance of the guarantee hasn’t changed much won’t be important when confronted with such a powerful image. The importance of the Sears guarantee came not from the fact that you could conceivably return that pair of pants when they failed to give ‘satisfaction’ because they could no longer contain your ballooning ass; the importance came from the fact that it respected the customer utterly, and because it spoke volumes about Sears’ faith in its merchandise.

I avoid shopping in places that impose ‘restock fees’ on returns. In an average month, I spend thousands of dollars on electronic gadgets and supplies, both for my own use and for my clients’. Once in a while — which works out to be a few times a month — something won’t work out and it’ll need to go back. I can appreciate that these retailers are not interested in serving as a technology lending library, and I understand that there are costs involved in processing returns. Nevertheless I’m not interested in doing business with people on an unequal basis (this is Customer Service Rule #17, ‘Practice customer parity); If someone wants to collect 10% from me for ‘restocking fees’ if I return a product because I couldn’t or didn’t make sure of its usefulness to me before buying, I expect them to pay me a 10% service fee if I have to exchange anything because it’s defective. Nobody does this, and in fact attempting to do so would be a nightmare; people would take things home, break them, and come back for a 10% discount. The answer, perhaps, is not to charge ‘restocking’ fees.

Sears is a long way from the restocking-fee con: 90 days is a perfectly reasonable restriction on returns. But the fact that they’re ready to give up ability to simply promise unconditional satisfaction to their customers in exchange for simpler bookkeeping suggests that Sears’ management is focused more on their internal mechanisms and procedures than on their public image and their customers.

Posted by tino at 09:36 25.02.05
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You didn’t miss the press release that Sears and K-mart are http://money.cnn.com/2004/11/17/news/fortune500/sears_kmart/ ">merging, right? Regardless you are 100% correct about the tools. I buy Craftsman tools because they are well made and are easy to exchange. Snap-On tools are frequently 20 times the price, and they aren’t even gold-plated or made out of pure titanium. Frequently the Snap-on guys don’t even like to sell to us mere mortals. The few times I have ever broken a Craftsman tool, it’s been because I’ve been abusing it (think long cheater bars).

Posted by: steel at February 25, 2005 11:08 AM

You’d have to live under a rock not to have heard about that, but what relevance does the merger have on this decision?

(The “merger” looks a lot like KMart buying Sears, which is pretty bizarre considering they just came out of bankruptcy.)

Posted by: Nicole at February 25, 2005 11:37 AM

Sears may be changing its warranty policy to be more in line with K-mart’s. You have a merger of two companies that just can’t seem to compete with “mall-wart”. Hopefully by clinging together they can stay afloat. I can’t remember the last time I went to Sears to buy anything besides tools. I drive right by a K-mart that’s only a mile down the road to reach my local Wal-mart. The local K-mart is that awful.

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