Why Making Returns Harder Could Cost Retailers More in the Long Run

As major retailers tighten their return policies to cut costs, a decades-old accounting lesson from a New Jersey carpet wholesaler offers a cautionary counterpoint: making returns harder may create larger financial problems than it solves.

Gene Marks, a small-business accountant with more than 30 years of experience, recounts the practices of Jerry Crawford, a wholesale carpet dealer in southern New Jersey who ran a roughly 50-person operation serving both local and national retail clients. What stood out on Crawford's books was a conspicuous reserve set aside specifically for product returns — a line item many small businesses never bother to establish.

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The principle behind such a reserve is straightforward accounting discipline. By setting aside funds in anticipation of future returns, a business smooths out the financial impact when goods come back — avoiding the kind of sudden losses that can destabilize cash flow. The practice is standard at large corporations but routinely overlooked by smaller operators who may view returns as rare or manageable without dedicated reserves.

The broader retail landscape has moved in the opposite direction. Facing mounting costs tied to reverse logistics, restocking, and fraud, many retailers have imposed stricter return windows, restocking fees, and in some cases eliminated free returns altogether. While those measures aim to protect margins, Marks suggests they may alienate customers and ultimately undercut revenue more than a well-managed returns reserve would.

For small businesses especially, the lesson is less about policy and more about preparation: accounting for returns as a predictable cost of doing business, not an exceptional one, may be the more sustainable path. Continue reading at Business | The Guardian.