Free online returns addicted shoppers. Now retailers are trying to recoup those costs TBEN radio


Cost of living4:56No more free returns?

Julia Harrison has a daily routine: working, walking her dogs and visiting various online stores for her next big clothing purchase.

“Aritzia is my number one, followed closely by Nordstrom, The Bay… Zara, H&M. That’s pretty much the main lineup,” the Victoria, BC, native told TBEN Radio’s Cost of living.

Harrison started shopping online during the COVID-19 pandemic when in-person shopping was not an option. Now it’s become something of an obsession – fueled in part by the fact that she can return most items for a full refund.

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But these free online returns, once used to lure shoppers like Harrison out of physical stores, have become so expensive that many retailers are now looking for ways to wean shoppers off the habit.

“It’s a vicious cycle of buying everything in my cart, returning it three quarters and buying everything again. It just never ends,” said Harrison.

“My checkout this morning was like $1,300. But I was like, ‘Oh, I’ll get that back.’ “

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Surcharges help to recoup the return costs

Harrison must drop her return at the local post office in Victoria. While it costs her nothing to do so, returns do cost retailers, sometimes in the millions of dollars.

According to a study conducted in the US by Pitney Bowes earlier this year, returns cost retailers up to 21 percent of the item’s original value, taking into account shipping, handling and restocking.

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More retailers have started adding surcharges to online returns to recoup some of the costs, resisting the free returns policy that has become an industry standard in recent years.

Still others are finding more innovative solutions to help control costs and reduce the environmental impact of returns to a warehouse.

A man sits outside a Zara clothing store in Nantes, France, in March 2021. Zara announced earlier this year that it would be adding a surcharge to online returns in the UK, ending its previous policy of free returns for online purchases . (Loic Venance/TBEN/Getty Images)

Fashion retailers are turning the tide

Return policies vary by brand and industry. But the tide seems to be turning fastest in the fashion industry, where the free returns trend probably first became so prolific.

In the UK, fashion brand Zara recently introduced a £1.95 (about $3 Cdn) surcharge for online returns, alongside other brands such as Uniqlo and Next.

“Customers can return online purchases for free at any Zara store in the UK, which is what most customers do,” says a representative told TBEN. Returns for online Zara orders in Canada are currently still free.

In Canada, online returns cost $7 at Abercrombie & Fitch and $9.90 at Uniqlo, which also do not allow online returns in store.

The return shipping fee greatly influences where Harrison decides to shop.

“I’m editing my cart and waiting a few days to make sure what I want is what I really want, [and] look up reviews,” Harrison said, noting that she’s generally more aware of her online shopping habits when she knows she won’t be able to get a full refund if she returns an item.

According to a 2017 Canada Post survey, a majority of respondents share Harrison’s view. The study found that 57 percent of online shoppers would not purchase items from a retailer that does not offer free returns by mail or courier.

However, 40 percent of respondents said they would be willing to pay for returns if they split shipping costs with the retailer.

A man with brown hair and scruffy facial hair smiles.
Retail expert David Ian Gray says the free returns policy once used to promote online shopping has become an industry standard – an expensive affair for many retailers. (Chung Chow)

Consumer expectation became industry standard

David Ian Gray, a retail marketing expert and founder of Vancouver-based consultancy DIG360, said free returns were originally intended to make online shopping more attractive to people more accustomed to buying in-store.

They became especially important in the fashion industry. After all, clothing never quite looks, feels or fits exactly as the image on a website suggests.

“The crux is that consumers are pretty good gamers,” said Gray. People found that instead of trying on different sizes in a fitting room, they could buy multiple sizes, keep the size, and return the sizes that didn’t fit for a refund.

Over time, free returns grew into a consumer expectation and an industry standard – one that comes at a high cost for retailers.

“Even going back to a warehouse here in Canada, and then unpacking it in the warehouse, [then] finding a place to store it where it can be picked up — all that handling is labor intensive,” Gray said.

As online returns fees become more common, he said retailers are considering other measures as well.

A Canada Post employee carries packages while making deliveries in Vancouver on Dec. 24, 2020. A 2017 Canada Post survey found that 40 percent of respondents would be willing to pay for returns if they shared shipping costs with the retailer . (Darryl Dyck/The Canadian Press)

One option is simply to raise prices to offset the expected return costs. Another is the introduction of membership tiers with free returns as an added benefit.

Some brands have personalized their online stores to provide as much information as possible about fit, color and other features so that customers don’t have to buy multiple versions.

For example, high-end Canadian footwear brand Fluevog provides different explanations about the fit of its products and offers live chats with representatives to guide customers through the buying process, much like speaking with a clerk at a brick-and-mortar location.

“They’re trying to slow down people’s experience on the site so that when they view the item, they’ve done a pretty good due diligence, which is exactly what they want,” Gray said.

LOOK | The high environmental cost of free online returns:

Why free online returns are terrible for the environment

Between 30 and 40 percent of all online purchases are returned. You may not realize it, but those revenues cost the environment, says an expert.

Sending it back forward

Anthony Kentris, co-founder of the clothing company Good for Sunday, offers a unique solution called EcoDrop: If a customer buys an item they no longer want, they can get a full refund by shipping it directly to the next customer.

Kentris says the solution uses less fuel and reuses the item’s original packaging, which is made from recycled and recyclable material. It also saves Good for Sunday money.

“It’s very expensive for a small company like us to keep up with the free returns standards that larger companies have set.”

Amazon, the largest online retailer in the world, has long allowed free returns, something experts say has environmental and business implications.

A woman leans on a man's shoulder in a studio portrait.
Demetra and Anthony Kentris, co-founders of Canadian fashion brand Good for Sunday, offer free refunds with their EcoDrop program, which allows customers to ship returned merchandise directly to the next buyer. (Paul Bolasco)

Shipping an item from an Ontario customer to Good for Sunday’s headquarters in Toronto costs $12, Kentris says. To ship from BC, it jumps to $25 or more. Those costs were especially high during last year’s flooding on the west coast.

“If we have our margins on our business and we pay $25 out of pocket, that’s where almost all of our profit goes,” he said.

To make EcoDrop a more attractive option, Good for Sunday charges $12 for a traditional return. Kentris says that in the few months since launch, about half of their customers choose EcoDrop.

The Good for Sunday website advertises that its products are made from eco-friendly materials and made with ethical labour, so for Kentris it’s also about doing its part to offset environmental costs.

“When you return an item, often it just ends up in a landfill. So if brands adopted this, it would help eliminate all that waste,” he said.


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