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Consumers push back on retailers’ online return fees

Amazon has perfected the returns process for online purchases, setting up drop points where consumers can leave items with or without packaging. But many retailers are taking a different approach, choosing to add fees to return online purchases. (Photo: Associated Press)

Aaron Schwartz, president of Loop Returns, has said that between 60% and 70% of online shoppers will review a return policy before shopping with that brand for the first time. Technology company CleverTap said that 76% of first-time shoppers said they are likely to shop with a retailer again if the return experience was “easy” or “very easy.”

The National Retail Federation conducted a survey before the 2021 holiday season. The Consumer Returns in the Retail Industry 2021 survey found that $761 billion in merchandise was returned in 2021 among all retail channels. For every $1 billion in sales, retailers incur $166 million in costs because of returns. Online returns totaled $218 billion in 2021. Returns from online sales jumped to 20.8% in 2021.

As Black Friday marks the official kickoff of the holiday shopping season, and with Cyber Monday just days away, it would seem now is the time for retailers to make the returns process as effortless as possible. And yet, more and more retailers are trying to make the process more difficult for consumers as they battle the cost of returns. 

More than two dozen major retailers have announced fees for returning items bought online. Among them are Abercrombie & Fitch, Dillard’s, Foot Locker, JCPenney Urban Outfitters. Neiman Marcus and Saks Fifth Avenue. In some cases, a return is a flat fee, but in others it may be free for a specific period of time and then a charge applies.

FarEye has released a new survey of 1,000 U.S. and U.K. consumers and found retailers that charge for returns could be doing more harm than good for their bottom line.

“Returns are a problem for retailers, costing on average, 66% of the total purchase price, yet the retailer doesn’t see any revenue from the purchase,” said Kushal Nahata, CEO and co-founder of FarEye. “Putting the cost on the consumer is not the answer, however. Retailers need to take a critical look at their returns strategy to drive down costs in ways that do not impact the consumer, like offering multiple drop-off locations for returns to reduce carrier costs and drive efficiency. These survey findings — while not surprising — reveal a mismatch between retailers’ plans and consumer expectations.”

Ninety percent of respondents to the FarEye survey said they would be cautious about shopping with a retailer that charges for returns. In addition, 50% of U.S. consumers said they would not pay for a return.

Watch: What will the holiday shopping season look like?

The survey, conducted earlier this month just as the holiday shopping season began kicking into high gear, found 61% of U.S. consumers and 51% of U.K. consumers made at least one return during the 2021 holiday season, and 42% and 53%, respectively, anticipate making a return this year.

Clothing purchased online traditionally has a higher return rate than many other items as consumers buy multiple sizes to get the correct fit. This is contributing to the returns problem, FarEye said, with 29% of U.S. consumers and 48% of those in the U.K. admitting they plan to buy multiple clothing items with the intention of returning some.

Most consumers — 84% in the U.S. and 82% in the U.K. — said being able to return items between 30 and 90 days is also important to them, so retailers with more restrictive policies — such as Neiman Marcus, which accepts returns for free for 15 days before charging $9.95 — could be losing out on customers that turn to competitors with more lax policies.

“Consumer expectations will no doubt remain high throughout the holiday shopping season — one of the most profitable and critical revenue time periods for retailers,” Nahata said. “As retailers continue to simplify the last-mile delivery experience, they cannot forget about the returns experience. This too should be just as simple as the delivery experience.”

The survey did offer some hope, though. In the U.S., 37% of consumers reported preferring to return items in store. That figure was 35% in the U.K. A post office or drop-off point was favored by 31% and 44%, respectively.

Accepting online returns in store is actually the cheapest method for retailers and, according to research by PayPal’s Happy Returns division, actually a growing option for many.

More than half (54%) of respondents to a recent Happy Returns survey said they prefer in-person, box-free return options compared to just 26% preferring home pickup. In fact, 63% of shoppers said they would be much more likely to shop with a retailer that offers free, package-less returns with immediate refunds.

“The growing preference for in-person, box-free returns is a huge opportunity to deliver customers the seamless returns experience they’re looking for while significantly driving down costs by up to 40%,” said David Sobie, vice president of Happy Returns.

Once in store, 62% of respondents said they have used their refund to shop at that location.

Another option is returnless refunds — where the retailer allows the consumer to keep the item while refunding the purchase price. Narvar, in a survey released in 2021, found 75% of shoppers had been offered a refund without having to return the item.

“It is actually cheaper to give shoppers the refund versus having to facilitate the return,” the Narvar survey noted. “Both the shipping and other operational costs that go into a return tend to be more expensive than the actual item shoppers purchased, so retailers are willing to just take the loss on the item and avoid a bigger loss in facilitating the return.”

For the customer, the experience is often a positive one, with 87% reporting this approach makes them more likely to shop with that retailer again and 40% saying they would recommend the retailer to others.

What is not making the customer happy? Paying for returns.

Click for more articles by Brian Straight.

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Brian Straight

Brian Straight leads FreightWaves' Modern Shipper brand as Managing Editor. A journalism graduate of the University of Rhode Island, he has covered everything from a presidential election, to professional sports and Little League baseball, and for more than 10 years has covered trucking and logistics. Before joining FreightWaves, he was previously responsible for the editorial quality and production of Fleet Owner magazine and Brian lives in Connecticut with his wife and two kids and spends his time coaching his son’s baseball team, golfing with his daughter, and pursuing his never-ending quest to become a professional bowler. You can reach him at [email protected].