When the replica Howdy Doody puppet was sold each Christmas, the owner of the toy store I ran would always shoot me an "I told you so" look. After it got returned not long after Christmas, I would send the same look back his way.
That same Howdy Doody puppet would be purchased each year by grandparents who remembered the character and just assumed their grandchildren would want it. The kids -- who had no idea who the puppet was or why a puppet would be fun -- would bring it back to exchange for a toy they actually wanted.
Managing returns isn't about what you sell. Instead, it's an exercise in making sure the right item ends up in the hands of the right gift recipient.
It's about customer service
Sometimes customers come into a store with a specific list of what people actually want. If the gift recipients have picked those items out themselves, that's generally a good situation that won't result in returns.
At other times, however, customers may come in knowing that someone on their list likes your store. The gift-giver might have a vague idea of what the recipient wants, but there's a lot of room for interpretation.
As the store owner/manager, it's your responsibility to make sure the gift buyer makes the right decision. At the toy store, for example, we sold a wide range of radio controlled cars. A well-meaning parent would come in and would want to buy an expensive gas-powered model, which wasn't right for most kids.
Gas-powered cars require a certain level of expertise. Putting one in the hands of a beginner or a young child almost always resulted in the customer trying to return a broken car.
Suggesting the customer buy an electric vehicle lowers the value of the sale. That may seem like a mistake, but selling the wrong item just because it's more expensive will end up in a disappointed customer and an upset gift recipient. Doing the right thing will build strong long-term relationships, and that's better for your business in the long run.
Manage for ongoing success
There are very few advantages a small business has over its larger competitors. One is that you can take the time to get to know your customers and treat them well. During the holiday season, that means working to help your customers buy the gifts they need, not the ones you want to sell them.
That will reduce returns. It will also build customer satisfaction and strengthen long-term relationships that will help your store during the slower parts of the year.
You have a level of expertise about your products that most of your customers won't -- and that increases during the holiday season when gifts are being bought. If you lend that expertise to do what's right for your customers, not your short-term bottom line, you will have fewer returns and a stronger business over time.