23 November 2022
4 min read
Free returns may be a thing of the past
Some retailers have started to charge for returns processed to different customers, because shipping costs are increasing and the work involved is a very high expense on an annual basis.
While consumers have become accustomed not only to free shipping but also to free returns, eCommerce, on the other hand, struggles to cope with the large costs involved. Costs that refer for example to the labor involved in the processes, preparation for the product to be resold, shipping costs, among others.
Why are companies charging for returns now?
Given the financial complications that many retailers have faced in times of Covid, and, following the increase in sales and returns during the pandemic, most retailers have decided to penalize the customer by making them pay for at least part of the return process.
Consumers often purchase large quantities of the same product in different colors/sizes, and return those they don’t like/want. According to data from the National Retail Federation, shoppers returned about $100 billion worth of merchandise they had purchased online in 2020. In 2021, that amount increased to about $218 billion.
According to one estimate, processing a return costs a company 66% of the price of a product. According to another estimate, a return can cost as much as $10 to $20 for the company, not including the cost of shipping. Consequently, we can see that retailers lose, on average, millions of dollars each year by letting unwanted products be returned for free.
Which companies charge a return fee?
Still, the era of free returns may be coming to an end. H&M plans to start charging a return fee to see how customers react, while Zara recently added a $3.95 fee. JCPenney, Abercrombie & Fitch and J.Crew also charge for returns, typically about $7.50 or $8.
Other companies, on the other hand, have taken a different approach in which they offer free returns only to their most loyal shoppers.
Consequently, what can consumers do to avoid paying for returns?
The possibility of dropping off the product in-store or at a pick-up point is a good alternative to avoid the cost of returns on the customer’s side. While going out of your way to drop off a package may not seem the most convenient, it can help keep prices down in the long run, because otherwise, if the cost of returns continues to rise, retailers will look for new ways to recoup those losses.
Chances are that to get to those higher margins, a higher price point will have to be added to those items at the beginning of the purchase, so this is sort of an incentive for the customer to take their share of recovering those goods without necessarily having to charge for it.