Apple App Store return policy too liberal?

March 26, 2009

A somewhat puzzling return clause in the Apple developer agreement for the App Store could make life difficult for developers, depending on Apple’s implementation of the wording.

There is nothing wrong with a liberal return policy. It can make a retailer a lot of friends in the customer base and lead to a lot of return business ““ the positive kind. There are some brick and mortar retailers that do an excellent job of doing exactly that, turning what could be a negative into a really powerful positive. If it works in the non-virtual world, it will probably work in the online world. Still, it could cause developers some fiscal pain. Here is the clause in question, from the “œResponsibility, Liability and Indemnity” section of the contract, according to a CNET article:

In the event that Apple receives any notice or claim from any end-user that: (i) the end-user wishes to cancel its license to any of the Licensed Applications within ninety (90) days of the date of download of that Licensed Application by that end-user; or (ii) a Licensed Application fails to conform to Your specifications or Your product warranty or the requirements of any applicable law, Apple may refund to the end-user the full amount of the price paid by the end-user for that Licensed Application. In the event that Apple refunds any such price to an end-user, You shall reimburse, or grant Apple a credit for, an amount equal to the price for that Licensed Application. Apple will have the right to retain its commission on the sale of that Licensed Application, notwithstanding the refund of the price to the end-user.

Let’s apply this clause to the developer. Apple takes 30 percent of every sale made via its App Store. For example, they would get $3 for a $10 app and the developer would get $7. That may sound like a big piece if the action for Apple, but they do all of the marketing, give the developer access to the Apple customer base, handle all the transactions, etc. It really is not a bad deal.

Apple, however does not seem to be holding up it’s end of the returns. The developer has received $7 for his $10 app. But if it is returned, Apple charges the developer the whole $10 and keeps its $3 cut. To be a little bit fair, Apple has already expended its share of the cost of the sale, and now has to handle the “œpaperwork” for the return. But still, should the developer pay the full price for the return when it is Apple that is making the final decision? Apple does, after all, have an approval process for every app they accept and sell in the App store.

The answer is going to depend on how Apple builds procedures for returns, and the law of averages as applied to consumers. Some small percentage of users will always try to find a way to get their money back. If the developer has done his or her job well, and if Apple has done a good job vetting the app, the percentage of returns should still remain very small.

If Apple’s procedures make it too easy, this clause could be reason for some developer concern. But even a 10 percent return ratio, very high for a good product, would not result in huge losses. A return rate of something like 2-3 percent is almost to be expected. All of this will be finally determined more by Apples return process than anything else. If it is too easy to return apps, developers may want to think about renegotiating that clause.

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