The age of free online returns is ending
We've all been there - scrolling on a clothing brand's website, finding a pair of jeans we love only to toggle between two sizes, unsure which will fit. So we order both, fully intending to return the pair that doesn't work.
Retailers have subtly discouraged such multi-size ordering - a process known as bracketing - and returns in general by omitting shipping labels from delivery packages even as they continue to give full refunds when customers brought merchandise back.
Now, they're showing a bit more candor. Several major chains, including Anthropologie, Zara, H&M, Abercrombie & Fitch and J. Crew charge $4 to $7.50 to restock merchandise or for a return label.
"Honestly, I have been waiting for this for a long time and have been advocating for it," said Sender Shamiss, the chief executive at returns management provider goTRG.
Returns are wasteful from both financial and environmental perspectives, and worsen the inventory glut that has been plaguing retailers for months. They're also pervasive: 78 percent of shoppers have returned at least one online purchase, according to a survey by parcelLab, a global returns management platform.
Meanwhile, the company's internal data showed that Americans returned 47 percent of their online purchases so far this year. That's roughly 23.2 million items. Globally, the number of returns is up 13 percent from 2021 levels.
Companies also have more incentive to drop free returns in this era of persistently high inflation and economic uncertainty, which have made shoppers savvier and more selective. The nation's largest chains have resorted to steep discounts to offload the excess products and apparel piling up in their warehouses. That, along with increasing labor costs and high gas prices, are hollowing out their margins.
With worries a recession may be on the horizon, retailers and vendors are tightening their belts, Shamiss said. So, implementing return and restocking fees is both a deterrent to bracketing and makes it more likely online sales are final.
It also encourages consumers to make their returns in-store - where they won't have to pay fees. That's a win for retailers, who save on gas, postage and labor, and get another chance to make a sale.
But such fees risk alienating customers: More than half of the shoppers believe retailers should cover the cost of returns, according to the survey from parcelLab. Over 6 in 10, 62 percent, said they will shop elsewhere if they have a poor return experience and a similar share, 63 percent, said free return shipping is their top consideration when making an online purchase.
Donna Gallagher, 54, said JCPenney refused to waive an $85 return fee and 15 percent restocking fee for a mattress she purchased for her mother despite it being defective and not eligible for reselling.
"They told me that . . . I had two days to report a defect in the bed," said Gallagher, a preschool teacher director in Baltimore County. "I told them I was not about to pay any money at all for a mattress that's supposed to have a 10-year warranty on it and it wasn't even a year old yet. . . . That's ridiculous."
After getting nowhere with customer service, Gallagher raised her issues on Twitter, tagging both the retailer and Serta, the mattress manufacturer. Serta agreed to replace the mattress at no charge - typically disputes are settled at the retail level. Gallagher said the experience has made her reconsider how and where she shops.
"I am going to pay a lot closer attention to what return policies are from which store, and that will definitely make a decision whether I purchase that item or not," she said.
JCPenney did not respond to a request for comment.
The holidays represent the biggest spending season of the year, introducing more opportunities for returns. Though, in years past, companies may have simply accepted this as a part of doing business, this year is different - they don't have the space.
"They're bursting at the seams," said Thomas Borders, the vice president and general manager of product lifecycle cloud at data platform Inmar Intelligence. "Many of these places are having to put their incoming inventory into outside storage to even be able to take it into their distribution centers or networks."
Holiday shopping is easing some of that overstock. A record 196.7 million people shopped over the Black Friday weekend, according to the National Retail Federation. And data from Adobe Analytics showed that consumers spent $35.3 billion online over the five-day holiday shopping period.
Even if inventory levels off soon, retailers still have to grapple with the logistics nightmare that comes with returns, said Lauren Beitelspacher, a professor of marketing at Babson College in Wellesley, Mass.
"It's something that I think we often take for granted, but it has huge implications for the consumer experience as well as the supply chain because the supply chain was not designed to take merchandise upstream," she said.
To handle reverse logistics, retailers often hire companies like goTRG and Inmar. Both use software that helps stores decide whether a product should be sent back to the store, or, if it's no longer on shelves, be liquidated. The companies often sell the items to wholesalers or off-price retailers like TJ Maxx and Marshalls. Shamiss added that goTRG also sets up accounts on online marketplaces including Amazon, eBay and Walmart to sell the items on behalf of the retailer.
The companies also handle refurbishments, including electronic devices, which need to be wiped of data, and furniture, which needs to be inspected for all its parts. Best Buy does these processes in-house, according to a spokesman. About half of returned products are put back on shelves or online at a discount. But for the most part, a small percentage of returned items - excluding apparel - make it back onto the shelves, Shamiss said.
General merchandise sold for $25 to $40 will cost a big retailer "80 to 90 percent of the retail value of the goods in handling the product," he added. "And it's possible to even go consistently into the red."
Clothing has a higher likelihood of making it back into inventory, especially if it's returned in person. But the mail-in process is laborious and pricey. Someone has to make sure the clothes are in good shape, then steam them, fold them and package them. The garment needs to be as pristine as it was when a machine originally assembled it to be shipped, Borders, of Inmar, said.
"So all of that processing - each one of those touched by a human - cost money," Borders said. "The transportation costs money. The amount of time that the person who's doing the returns processing is spending - that's manual labor. Those people are earning a hourly wage as well."
Often those costs can exceed what a retailer would make if the item was reshelved and resold. That's when they have to get creative, like selling to a third party. But sometimes retailers tell consumers to keep the item because it would cost more for them to retrieve and process it than to just reimburse the customer. And with inventory backlogs, these companies don't want to more stock for their warehouses. Data from parcelLab showed 40 percent of customers were told to keep the items they wanted to give back, while 60 percent of all returns went to the warehouse.
Then there is the environmental impact. Often returns become waste, ending up in landfills. Yet putting merchandise back into the supply chain creates more emissions.
"[Returning items] is not the sustainability gold star that a customer things it is," Beitelspacher, the professor at Babson, said. "If you're purchasing something with the expectation of just returning it later, you really need to think like, do I really need this in the first place?"
With these factors in mind, more retailers are adopting fees to discourage bracketing and to offset the back-end costs. Dillards ($8.50), Big Lots (20 percent), JCPenney ($8), Footlocker ($6.99) and DSW ($8.50) are all on board. J. Crew, Bath & Body Works and Gap, including its sister brands, Athleta, Old Navy and Banana Republic, shortened their return windows.
"The list seems to grow every day," Borders said.
The parcelLab survey showed that nearly half of consumers want to return items in stores. But not all shoppers have this option.
Margaux, a video editor in the Detroit area who asked that her full name not be used to protect her privacy, said she abandoned a $150 online cart at Nordstrom Rack after reading that there would be $9.95 return fee.
"The closest store to me is about an hour drive," she said. "If I had a store within a 15-20 minute drive, I probably would have went through with my purchase."
Instead, Margaux, 25, placed a $400 order from fast fashion website Shein, largely because of its return policy.
"I know for a fact I will not keep $400 worth of clothing," she said. "I'll be lucky if I even keep $100 of it since majority of their clothing doesn't turn out as expected. But it fits my budget, and they allow free returns."
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