Weekly Thoughts

Growing Beans

Since some of our readers may not be as up to speed on headlines dominating the Maine news, we thought we’d share our thoughts on a recent policy change from our iconic hometown retailer, L.L. Bean.  For the past 106 years until just last week, L.L. Bean provided a lifetime – yes, lifetime – no-questions-asked guarantee on all of its products.  Business Insider explained just how accommodating the policy had been by testing it themselves:

“A Business Insider reporter put the policy to the test last year by returning four-year-old shoes with broken stitching.  He recounts that the cashier immediately accepted the return and asked for no proof about when he purchased the shoes.  Two days later, the brand-new shoes were waiting on [his] doorstep.”

While some saw the guarantee as a bold, differentiated stance from a business promising to provide products of great quality and durability, others (rather unfortunately) saw the policy as more of a personal “infinite replenishment” program.  Disappointingly, the latter group has been growing of late; L.L. Bean reported that the rate of “abusive” returns increased over the past five years to account for 15% of all returns and has cost the company approximately $250 million in total.  Chairman Shawn Gorman provided more insight in a letter to customers:

“Increasingly, a small but growing number of customers has been interpreting our guarantee well beyond its original intent.  Some view it as a lifetime product replacement program, expecting refunds for heavily worn products used over many years.  Others seek refunds for products that have been purchased through third parties, such as at yard sales.”

In place of the lifetime guarantee, the new policy gives customers one year to return a product if they are not 100% satisfied, provided they have a receipt. The company also added that if a product is defective, it will work with customers on a case-by-case basis beyond the year time-frame.  As one might expect, the response to the change has been mixed.  Many blame those who abused the policy for ruining a good thing, while others feel as though the company has reneged on its customer promise (so much so, in fact, that a lawsuit has been filed over the changed policy terms).  Still others, Chenmark included, have had a more muted reaction, acknowledging that their new policy is not only exceptionally fair but remains industry leading.

If we want to play the blame game, though, we believe it is L.L. Bean’s success which led to the demise of the policy.  While reporting is spotty given the company is privately held, we do know the business generates sales of $1.6 billion and in 2015, then-CEO Chris McCormick announced plans to triple its retail store count and unveil “at least 100” new locations by 2020.  To execute on this plan, the company has expanded into new geographies and currently has 48 locations across 19 states.  The aggressive growth has brought with it new markets and new customers who inevitably have a different relationship with, and loyalty to, the brand.  If L.L. Bean didn’t want to grow, it may have been able to hold onto its lifetime guarantee.  However the wider range of potential outcomes associated with greater scale have clearly magnified the impact of bad actors.

For Chenmark, this is a good reminder that no matter how established a company may be, in order to grow, it must adapt to new market environments.  This means it must be willing to evaluate, and potentially eliminate, even the most sacred of corporate policies while maintaining the core of a brand identity.  L.L. Bean is taking some heat for ending a 106-year tradition that in many ways defined the brand, but we applaud them for making the hard, but probably correct, choice.  After all, one year is more than enough time to decide if you want to BeanOutsider or not.