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Jennifer Howe is still holding onto gifts from Christmas she doesn't want. Slippers that are too big, a designer perfume she'll never wear, and candles.
“They look nice, but I’ve never been a candle person," she said. “I’m thinking about donating some of the stuff I got, or maybe re-gifting, since returning is a pain.”
She's not wrong. Retailers now are making returns more challenging, more confusing, and potentially more expensive. What a difference a couple of years make.
During the pandemic, retailers bent over backwards to make returns simple — and seamless — for homebound Americans. After all, retailers wanted shoppers to keep spending during what was an extremely uncertain time.
Now given the healthier retail environment combined with other factors (namely the higher costs of doing business), retailers are cracking down.
In fact, according to goTRG, a logistics company focused on returns, 6 in 10 retailers changed their returns policies in the last year alone.
Among the changes: shorter refund and return windows, shipping fees, restocking fees, and other surprises, said Shender Shamiss, president and CEO of goTRG.
Consumers like Nick Mueller are finding that out the hard way.
“I recently tried to return an article of clothing from REI, and was surprised to find out there was a $6 charge,” Mueller said.
“Returns have just gotten too costly and retailers are trying to protect their margins,” said George Trantas, Sr., director of global marketplaces at Avalara, a leading provider of cloud-based tax compliance automation for businesses of all sizes.
“The cost of returns could be upwards of $30 per item. You’ve got the outbound shipping costs, plus labor costs, plus return shipping, plus the labor costs of putting the item back on shelves and then the first markdown,” he said. “How can retailers recoup that original price? They can’t.”
“The process of shipping an item back can take away as much as 85% of the value,” Shamiss said.
The return problem has been brewing for some time, but has now reached the “tipping point,” said Trantas.
Consider this past holiday season.
On average, retailers expected 17.9% of merchandise sold during the holiday shopping season to be returned, according to the National Retail Federation’s most recent data. That’s up from 16.6% in 2021 and comes to about $171 billion.
Fewer businesses are in a position to be able to afford such a hefty price tag.
Online returns are the most problematic, said Shamiss.
“This is where the challenges are," Shamiss said. "‘Bracketing’ where you buy like five shirts, keep one, and send back the rest, has been one of the big contributors of these problems,” he said.
Retailers like Zara, H&M, and other chains have had enough. They’re now charging fees of up to $7 to return items online. Other retailers are encouraging consumers to make returns in stores, said Trantas.
“That’s one part of the solution because driving a customer to the store will increase foot traffic, may create a secondary sale, and can increase loyalty," Trantas said. "Just a 5% increase in loyalty can increase sales by up to 95%."
Greater transparency — and communication — is also needed, said Trantas.
“Retailers have to be very clear about their return policies to eliminate any consumer dissatisfaction and friction," Trantas said. “The new norm is 'know the policies.’”
Personal finance journalist Vera Gibbons is a former staff writer for SmartMoney magazine and a former correspondent for Kiplinger's Personal Finance. Vera, who spent over a decade as an on-air financial analyst for MSNBC, currently serves as co-host of the weekly nonpolitical news podcast she founded, NoPo. She lives in Palm Beach, Florida.
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