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Managing deliveries successfully, especially when dealing with customer returns, can be a significant way for your business to drive customer satisfaction. You have a legal minimum that dictates how you should handle returns according to your consumer law obligations. However, you can choose to go above this minimum if you wish. Fixing your mistakes and efficiently solving product issues can generate trust and customer goodwill. Therefore, you should duly consider how your business will handle returns. A key point when a customer sends back a product is the delivery cost for returns. Do you pay for shipping, or does the customer? This article will answer that question and some other elements to consider regarding how your store handles product returns.

When Can a Customer Send Back a Product?

Consumer law provides specific scenarios when customers can return a product and expect some kind of remedy and when they cannot. In essence, if you break one of your consumer guarantees regarding the product, then New Zealand consumer law obliges you to provide a remedy. 

Consumer guarantees mean that, in selling a consumer product, you guarantee to your customers that the product:

  • is fit for its intended purpose;
  • is of acceptable quality (i.e. free from minor defects with an appropriate finish and is durable);
  • matches your description of it;
  • is the same as any sample or demonstration models you advertise;
  • will be delivered in good condition and on time;
  • is sold at a reasonable price if there was no predetermined one; and
  • is sold legally.

If you break one of these guarantees, then you have to provide a remedy, usually in the form of a:

  • repair;
  • replacement; or
  • refund.

Situations Where You Do Not Need to Provide a Remedy

Outside of the above circumstances, however, customers do not have the right to demand a remedy from you. You can decide to provide remedies in these instances as it suits your business. Such examples are when:

  • a customer changes their mind;
  • they damage or break the product after delivery, whether by accident or on purpose;
  • customer misuse occurs (such as not reading provided instructions) that leads to product damage;
  • the customer buys a faulty product despite knowing about the fault;
  • an unreasonably significant amount of time has passed before the customer reports the defect; or
  • the fault occurs due to circumstances out of your control, such as third party interference.

For example, say that you sell fragile glass ornaments and label them as such, specifying instructions for use. However, a customer disregards those warnings and breaks the ornament through their misuse. In this case, you likely would not have to provide a remedy.

Returns and the Delivery Cost

If you break one of these guarantees, such as providing a faulty product, you must provide a remedy. However, if it was a minor fault, you get to decide what kind of remedy you wish to provide.

For example, you may decide to send the customer spare replacement parts rather than issuing a brand new replacement product or refund.

If the fault is minor, or the customer merely wishes to return the product because they changed their mind, you do not have to cover delivery costs in most cases. However, if the fault was significant, the customer can choose which kind of remedy they want. You must reimburse them for any reasonable loss caused by the serious product defect, which the delivery cost for returns would likely come under. 

For example, a customer might pay for delivery costs initially when they send an item to you for repair after it has broken. But, they may be able to claim back that cost from you later.

A fault is significant when:

  • the product is unsafe;
  • a reasonable customer would not have bought the product if they had known about the fault beforehand;
  • the product is significantly different from descriptions or demonstrations you gave; or
  • the product is substantially unfit for its intended purpose.

Do What’s Right For Your Business

As long as you provide the legal minimum (righting broken consumer guarantees with their appropriate remedy), then this is enough to meet your consumer law obligations. 

For example, say a customer calls your business saying that a pair of headphones they bought from you stopped working soon after purchase. You can choose to send a pre-paid postage label to cover their delivery costs. Or, they can cover delivery costs when they send the headphones to you for inspection. You would later reimburse them for that cost after you confirm that the headphones are faulty.

Either of these options is acceptable. However, consider the kind of customer relationship you want to foster. If a customer remembers that you handled their return free-of-charge without the inconvenience of arranging postage, they may be more inclined to do business with you in the future.

Unfortunately, this may also impose an unnecessary cost on your business. Therefore, you need to weigh up the costs of your returns process against customer satisfaction and decide how you want to manage this balance. What is fair for your business, and what kind of service do you want to provide your customers? Outline whatever you decide in your returns policy or terms and conditions.

Key Takeaways

If a customer returns a product because they changed their mind, you do not have to cover the delivery cost for that return. However, if they are returning a product because of a significant fault, then you either have to pay for delivery costs initially or reimburse them after the fact. If you would like more information or help with your returns process, contact LegalVision’s New Zealand regulatory and compliance lawyers on 0800 005 570 or fill out the form on this page.

FAQs

Does my business pay delivery costs on customer returns?

Whether your business pays delivery costs on customer returns depends on why they are returning their purchase. If the product is faulty and they are returning it for repair, they can claim back delivery costs from you.

Do I have to pay postage on my products?

It is up to your business whether you cover shipping costs for delivering your products. You may offer free delivery after certain price thresholds or incorporate shipping costs into your prices.

What does “free returns” mean?

“Free returns” generally means that customers do not have to pay delivery costs for returning products. This would apply to items that they have changed their mind about or just wanted to return because they had the wrong size.

When can a customer return a product?

A customer can return a product if it is faulty and expect some kind of remedy. If that fault is serious, or the product is substantially not fit for purpose, they get to choose what kind of remedy they get.

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