Return to Santa
For retailers, this can mean an influx of customers wishing to return unwanted items for a multitude of reasons.
Customers are not automatically entitled to a refund, exchange or credit note if they change their mind, end up receiving the same gift from two different people, or want to change the colour of their present. However, retailers need to ensure they understand the rights their consumer customers have.
Getting it wrong not only risks prosecution from the Commerce Commission or a claim from the consumer direct, but can result in being “named and shamed” through various social and media channels.
Returns for ‘change of mind’
If retailers wish to accept returns where customers have simply changed their mind, they should have a returns policy clearly displayed at the checkout or on their website. This will ensure customers are aware, at the time of purchase, what your policy is and any special conditions which may apply.
Of course, in some instances, it may not be practical to accept returns of certain items such as sample items, sale goods, underwear or swimwear, food and beverages. Your returns policy should clearly set out any exclusions.
Return policies should also set out whether you offer a refund, exchange, or credit note for returned goods. The timeframe within which the customer has to return the goods, the proof of purchase required to return an item, and any other relevant conditions (for example, a requirement that goods are in their original condition and packaging) need to be carefully considered and included.
It’s common for gift recipients not to have any original proof of purchase which meets the requirements of a retailer’s returns policy. For this reason, many retailers offer gift exchange cards with certain purchases, allowing the recipient to exchange a not-quite-right gift for something perfect. Like a returns policy, an exchange card should clearly state any conditions attached to it (such as an expiry date).
If you don’t want to offer any refund for goods where a customer has changed their mind, you should also make this clear at the time of purchase, whether in store or online.
However, it’s illegal to simply say “no refunds” as this can mislead customers about their rights under the Consumer Guarantees Act (“CGA”). A retailer could instead say “please choose carefully as we don’t accept refunds or exchanges if you change your mind – but you’ll still have rights under the CGA”. This makes it clear that while the retailer does not accept returns for a change of mind, the consumer still has rights under the CGA in relation to the goods which the retailer is not illegally trying to exclude.
Customers’ rights under the CGA
Retailers have an obligation to ensure they are familiar with consumers’ rights and remedies under the CGA before they accept or reject the return of any products. Where goods or services for personal, domestic or household use sold by a retailer fail to comply with any guarantee, retailers will be obliged to refund, replace or repair the faulty goods.
Briefly, the CGA guarantees that goods will be of acceptable quality, fit for purpose (including any purpose which the customer tells the retailer before purchasing the product), and match their description or any sample provided. Additional guarantees apply in relation to title of goods, and the availability of spare parts or repair facilities from manufacturers or importers.
The seriousness of the good’s failure to comply with the guarantee will determine whether the retailer, or the consumer, chooses the remedy.
For faults which are only minor (for example, a loose buckle on a leather handbag), you as the retailer can choose to either repair, replace or refund the customer. Note that you have to remedy the failure within a reasonable time – if not, the customer is entitled to reject the product and seek a refund, or have the item fixed elsewhere and claim the cost from you.
If there’s something seriously wrong with the product, or it cannot be fixed, the customer can choose their own remedy, being a refund, exchange, or compensation for the drop in value of the good because of the fault. The customer can also seek reasonable compensation for any loss they suffer as a result of the failure. An example of a substantial fault could be a juicer which doesn’t turn on when plugged in – so it does not work at all.
Don’t forget the Fair Trading Act
Apart from prohibiting misleading and deceptive conduct in trade, the Fair Trading Act (“FTA”) also contains a number of requirements which apply to cancelling certain types of sales.
For example, businesses selling goods over $100 through door-to-door sales should be aware that customers may cancel their agreements within the mandatory 5 working day ‘cooling-off’ period under the FTA. Similarly, customers who purchase goods on layby are entitled under the FTA to cancel the layby sale agreement orally or in writing at any time before they receive the goods.
It may be ‘the most wonderful time of the year’, but the Christmas period is a busy time for retailers with a lot to think about. It’s important for retailers to be clear at the time when customers purchase goods what their returns policy is for customers who change their minds, be aware of and comply with their obligations under the CGA, and to effectively manage customers’ expectations. Doing so will mean that your business stays on a customer’s ‘nice’ list, and not the ‘naughty’ list.
If you’d like any further advice on these matters or assistance drafting any returns policy please get in touch with us.
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