The Christmas shopping season is always closely followed by a spike in gift returns.
But this year it might be harder to bring things back for free or for a low cost.
About 60% of retailers said they are making changes to existing returns policies, with less promising free returns, according to a recent survey of retail executives.
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On average, retailers expect about 18%, or $158 billion, of merchandise sold during holiday shopping to be returned, according to the latest data from the National Retail Federation.
For 2021, the return rate is about 16.6% of total U.S. retail sales, or $761 billion in returned merchandise, and in 2022 fewer companies will be able to afford such a hefty price tag.
With rising costs putting pressure on margins, many retailers are rethinking their return policies, shortening the return window and even charging a return or restocking fee, said Spencer Kieboom, founder and CEO of Pollen Returns, a returns management company.
Expect shorter return windows, restocking costs
A postman holds Amazon.com packages as he prepares a vehicle for delivery at a United States Postal Service processing and distribution center in Washington, D.C.
Andrew Harrer | Bloomberg | Getty Images
Stores like Gap, Old Navy, Banana Republic, and J. Crew (which was once known for a generous return policy that spanned the life of a garment) have reduced their regular return window to within a month. Year-end customers are getting a bit of a reprieve, though: J. Crew and others are currently offering extended holiday returns and exchanges.
At Anthropologie, REI, and LL Bean (who also once promised lifetime returns), there’s now a fee — all around $6 — for mailed returns.
“These changes in the return policy are not there to cover the costs,” says Kieboom. “They’re really there to deter consumers from returning.”
Rising costs are depressing margins
With the explosion of online shopping during the pandemic, “free returns have been a model of great convenience that customers have appreciated,” said Erin Halka, senior director at Blue Yonder, a supply chain management firm. Now, with higher labor and shipping costs, it’s costing retailers “an enormous amount of money” to stay in business, she said.
“Charging returns is one way to cover some of those costs,” she said. “It can also deter customers from overbuying, as at least 10% of returned goods cannot be resold.”
Just as retailers struggle with excess inventory, “returns often don’t make it back to the shelf,” and that creates a problem for retailers struggling to streamline spending and improve sustainability, Kieboom said.
“The supply chain is designed to go one way,” said Lauren Beitelspacher, associate professor and chair of marketing at Babson College.
“The more money retailers lose on returns, the more they have to make up for by raising prices,” Beitelspacher said.
“Changing the return policy is an easier pill for the customer to swallow than an increase in the purchase price.”
How to avoid return costs
Yet shoppers love free returns almost as much as free shipping. In fact, 98% of consumers said free shipping was the top consideration when shopping online, followed by more than three-quarters who said the same about free returns, according to a recent report from PowerReviews. Affluent shoppers preferred a free return policy even more.
If the option to return is important, learn the policy before you buy, experts say. Often it’s not immediately obvious, Halka said. “Usually you have to dig into the fine print.”
Expect restrictions on what can be returned and when, she said. “A 30-day window is now typical.”
That time is well spent making the best possible decision about your purchase. “You have to find the return policy that works best for you,” Kieboom said.
For those who want to avoid returns altogether, in-person shopping may be your best bet, Beitelspacher suggested. “The majority of returns come from regret because it’s not what we expected. In-person shopping narrows that expectation-reality gap,” she said.
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