Topic: Return policies in a deflationary economy (Read 1685 times)

Yes. What I see happening is that the first batch of Bitcoin retailers will mostly be selling high-margin products where the volatility of Bitcoin from week-to-week is not such a problem.

Over time, the value of Bitcoin may become more stable. But even if it doesn't, things will get easier for retailers because they will be able to pay some of their suppliers using Bitcoin (which makes volatility much less relevant). No doubt there will also be enterprising bitcoiners who start providing hedging services tailored to the needs of retailers.

But the merchant is not required to return the shipping charge.

When Bitcoin matures and volatility drops, a 7-day call option will be much less valuable than the shipping charge.

So, effectively, Belgian law requires any retailer who accepts Bitcoin as payment, to provide no-charge 7-day Bitcoin call options. The law is probably the same throughout the European Union.

Which is not always possible. In Belgium, when buying without having the product in your hand first (internet, phone or postal shops), it is mandatory to have a 7 days return policy with no fee at all. The only fee that could be charged to the customer is the postal fee to send the good back (and it cannot be charged by the company itself, only by the postal service).

Also, no reason should be given for that return.


The solution I see is to allow the buyer to be reimbursed if the price falls in the next 7 days. If you buy your mixer for 10btc and, in the next week, price drops to 5btc, you will receive 5btc back.


For the merchant:
- it only means a 7 days window during which the sale is not considered as done and he should not spend the money (it's already the case anyway).
- if 10.000 mixers are sold on a given day, the merchant could artificially keep is price high for at least 7 days (at the price of lost sales in those 7 days, of course)

For the consumer:
- In a deflationary economy, it encourages you to buy stuffs because you may even have an unexpected discount.

Their solution is to charge a re-stock fee.

@Current-C: yes, I said "deflating in value" to distinguish from the ongoing inflation of supply. Bitcoin won't be deflationary in supply until the rate of destruction through data loss is higher than the rate of creation through mining.

What's a good name for an increase in the valuation of money, then? Appreciation, I suppose, but relative to what?

As for refunding the current value, this might be awkward with discontinued products (since the only reasonable "value" of a blender from Target is whatever they're charging for it), but I guess it could work---sort of. When I worked retail, customers with no receipt always griped when they got a refund for the lowest recent price. I think a shorter return window, say 5-7 days, would be a better plan where it's possible.

No, it won't make return policies unworkable.

Computer hardware retailers already  operate in a deflationary economy.  The price of their products deflates by about 30-50% every year, yet they seem to be doing fine, even in jurisdictions where a 30 day return policy is mandatory.  

If you buy an Intel processor or external HD it's very likely that 30 days later it has alread dropped in price.

So what is their solution? I guess they already factor in the losses from returns into their prices. Simple as that.

Also, don't forget that even in an inflationary economy, a lot of returned goods cannot be resold for the original price anyhow, because the packaging is damaged.


Anyhow, I doubt that once Bitcoin is a mature currency deflation will be higher than 30-50%

You can see this already in places like best buy that sell a lot of technology products that tend to lose value quickly.  Retailers compensate for the change in value by limiting returns and charging restocking fees etc.  One benefit of an appreciating currency is that it encourages savings over consumption, thus savers are rewarded with increasing purchasing power.  I agree that this would be partially offset by retailers narrowing their return policy but the benefit to the consumer will far outweigh the cost.  Additionally it will cause consumers to consider the true value of a product before purchase and they will seek out products of better quality that will retain their value.  If the market is free to decide these things in the long run we should see bitcoins become relatively stable in relation to products and commodities with appreciation pacing the increasing production level of manufacturers.  Increased efficiencies in one area will benefit the community as a whole through an rising purchasing power of the currency relative to the more efficiently produced product/service.

As a side note I'd like to encourage the Austrian definitions of "inflation" and "deflation" over the colloquial definitions.  "Inflation" in the Austrian sense is an increase in the supply of money.  "Deflation" is a decrease in the supply of money.  Rising prices are a symptom of inflation, not inflation itself.  Lowering prices are a symptom of deflation, not deflation itself.  Right now bitcoins are modestly inflationary (new coins are introduced through mining), however the currency is appreciating due to demand out-pacing that inflation.  After all the bitcoins have been mined, the supply will be stable to very slightly deflationary (due to some people losing their bitcoins which can never be replaced).  Not trying to be a smartass here I just genuinely thing this way of looking at money makes it far easier to understand how it all works. 

 

Yeah, there's definitely been a learning curve with pricing for our t-shirt store what with the gyrations of the past few weeks - and we only sell one product . At the moment we're not doing returns, but the policy of returning at the current price does make sense to a certain extent. However, stores that are having mark-downs will often still refund the full purchase price, so even doing that would not necessarily match the services offered by dealers of FRNs. My hope is that, if btc catches on, the initial run-up bubble and crash is followed by relative price stability. Until that happens, the growth of the goods and services economy will be a bit hobbled...

The policy could be to refund the price at which the product is currently selling. In your blender example, the refund would be 4 BTC.

Most retailers have a policy of allowing goods to be returned for a certain period of time for a full refund (usually 14-30 days). In some areas this is legally mandated. (Not all---in my home state it's mandatory to have an explicit return policy, but that policy may be "no returns ever".)

Bitcoin has recently been deflating in value very quickly. Will this make such return policies unworkable for retailers that accept it? If I buy a blender for 10 bitcoins today, and in three weeks I find that the same blender is going for 4 bitcoins---well, I can't say I'd feel ripped off, because it's not the store's fault the bitcoin has deflated. But if they're willing to buy my blender back for 10 bitcoins and sell me a new one for 4, it would be kind of stupid of me not to accept.

There may be some clever solution to this, but the most obvious is simply to refuse returns. This is not so great from my perspective because I'm a consumer, not a retailer, and like being able to return things that don't work out. What other solutions are there?