Is free at-home pick-up of online returns practicable?

Discussion
Photo: Walmart
Dec 22, 2020
Tom Ryan

Walmart on Monday announced a partnership with FedEx to offer customers complimentary at-home pickup of returns for merchandise bought online.

Although the intro is timed to handle holiday returns, Carrier Pickup by FedEx will be a year-round offering, Linne Fulcher, Walmart’s VP of customer strategy, science and journeys, said in a blog post.

Customers schedule a date for pickup and print a return label through Walmart’s website or app. Their package will then be picked up by a FedEx employee.

Customers without a printer can select “Drop off at FedEx” as the return method to get a QR return code and then take their package to a FedEx location, where an associate will scan the QR Code and print a free return label for shipping.

Walmart has specified spots in stores for customers looking to return items while observing social distancing. The return process can be started online before heading to the store.

“Combined with a year unlike any other, we knew it was time to look at our return policies and processes to ensure they were safe and headache-free,” Mr. Fulcher said.

Holiday returns are expected to spike this year. According to a recent report from real estate firm CBRE in collaboration with reverse logistics software provider Optoro, holiday returns are projected to surge 73 versus a five-year average. The growth is being attributed to the sudden growth in online buying and online’s significantly high return rate, up to 30 percent on average.

The study said as much as 400 million square feet of additional warehouse space could be needed in the next five years just to process returns. The report also noted that, for the average return, reverse logistics costs amount to 59 percent of the original selling price of the item.

On December 17, Amazon announced an extended holiday return policy and “no-box, no-label” returns at over 500 Whole Foods locations. The option is also available at Amazon Books, Amazon 4-star, Amazon Fresh, Amazon Go, UPS Store locations and Kohl’s. Walmart has also extended its standard return policy.

DISCUSSION QUESTIONS: Does picking up returns from households for free hold significant appeal for consumers and is it an economically feasible strategy for retailers? Are there other steps retailers should be taking to better manage online returns?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"If Walmart can pull this off, Amazon will likely follow, and the rest of the retail world will shudder (and maybe shutter)."
"First, we had free delivery. Now, we are looking at free returns. The overall cost of logistics may actually be larger than the actual price of the item!"
"Customers definitely want low-friction returns. When Amazon, Walmart, Happy Returns, etc. reduce the friction for returns, they increase confidence which drives more sales."

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37 Comments on "Is free at-home pick-up of online returns practicable?"


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Neil Saunders
BrainTrust

This is most certainly appealing for consumers, but I cannot see it being economically advantageous to retailers – some of which already suffer severe margin compression from the volume of returns. Consumers taking the product to a FedEx drop-off point is probably more cost-effective, but having drivers collect products from homes is expensive. Even if FedEx plan routes so there is overlap with deliveries being made, it is still time-consuming for drivers to collect things from individual homes. All that said, e-commerce is in a land-grab phase so retailers are less concerned with costs and more concerned with generating strong market share gains.

Richard Hernandez
BrainTrust

It means that customers don’t have to risk their health (if they do not want to) to return items. There are probably a lot of issues that will be ironed out as they go, but it is a start to meet the current demand for a more contactless process.

Mark Price
BrainTrust

Given COVID-19 concerns and in general consumer desire for convenience and simplicity, at-home pickup of returns should hold a great appeal. FedEx has the benefit of a constant stream of household deliveries, which makes it more efficient for them to pick up at the same time. In effect, this strategy permits FedEx to avoid “dead-end” trucks (empty trucks on the way back to the warehouse). FedEx makes money both coming and going.

As the volume of e-commerce shipments decline post-COVID-19, FedEx may have to focus returns on specific days to keep the efficiencies up.

Jeff Sward
BrainTrust

In a highly competitive pandemic-driven retail environment, complimentary at-home pick up of online purchases is highly attractive, and ludicrously expensive. So as a market share tactic, I get it. But it’s clearly not a profitable tactic, so I am immediately scratching my head. The return factor was already one of the biggest challenges to online profitability, and now complimentary pickup of returns encourages online shopping AND makes returns all the more expensive at the same time. Walmart has created a powerful competitive weapon here, but at what expense?

Gene Detroyer
BrainTrust

Everyone has certain stores they shop at. Those choices are for various reasons.

Watching my wife shop online, it has become clear that her go-to places are all about the ability to return. Every once in a while she will try a new one, in most cases ones with “names.” However if for any reason she must return the product and the retailer makes it difficult in her mind, in any way, she scratches that retailer from her stable.

Her default has become Amazon most simply because it is so easy to return. She says Nordstrom and Bloomies are very good also. Strangely, after Macy’s experiences, she refuses to buy from them. (Bloomies good, Macy’s bad? How can that be?)

The problems can be anything from how easy it is to process online to how difficult it is to get the package to the delivery service. (Of course, charging for returns is an automatic killer.)

So I guess the short answer is — this is an excellent move for Walmart.

Ricardo Belmar
BrainTrust

“Bloomies good, Macy’s bad? – internal silos at their very best! (Or worst depending on your point of view.)

Cathy Hotka
BrainTrust

I recently purchased a bouquet of silk peonies online, only to discover that it was sized for a Barbie.

Returns may be free for customers, but they’ll carry a huge cost burden for retailers. The industry needs a working group that can examine this problem in detail and come up with new approaches, including providing much better detail to consumers.

Sterling Hawkins
BrainTrust

Appealing? Absolutely. So appealing I could see some customers shopping with Walmart explicitly because of the ease of returns. Practical? Probably not given the costs involved at the moment. However if they stay the course, I’m sure reverse logistics costs will drop considerably. And it represents a better customer experience all around.

Georganne Bender
BrainTrust

Free pickup of returns is the logical next step, isn’t it? It will be a lot for FedEx drivers but consumers will love it.

I feel for the Amazon associates at the store level because the ginormous amount of anticipated returns is a nightmare waiting to happen; I can already visualize the piles of merchandise. All we can do is watch, hoping all will go as planned and 2020 will end on an up note.

Gary Sankary
BrainTrust

This is something that I expect retailers and logistics companies are going to figure out, the demand is certainly there. It’s expensive, but it’s also a differentiator for the retailers that do come up with a way to provide this service. Amazon is close. They are motivated to allow UPS and FedEx returns because most of their competition has physical locations near their customers and provide instant returns that way. Their partnership with Kohl’s is a response to that.
There might be options to provide store credit or make this service a loyalty benefit that would make it more palatable for retailers. Somehow I expect this will become the next evolution for unified commerce.

Lisa Goller
BrainTrust

At-home pickups for product returns are a consumer’s dream – and a retailer’s economic and logistical nightmare.

Convenient pickups are appealing because they reduce health risks and hassles, which could boost online sales and loyalty.

Yet e-commerce returns already create sizable costs and at-home service deepens the money pit. Now retailers need their logistics networks to criss-cross cities for returns as well as deliveries. Not cheap. Retailers will need all of Q1 2021 to process returns due to store closures, diverting resources from sales and service.

It will be interesting to see how many online sales this value-added service inspires and how it compares to the steep costs.

Michael La Kier
BrainTrust

A win for consumers, but this is another logistical and financial hit to retailers. If Walmart can pull this off, Amazon will likely follow, and the rest of the retail world will shudder (and maybe shutter).

Jason Goldberg
BrainTrust
Customers definitely want low-friction returns. When Amazon, Walmart, Happy Returns, etc. reduce the friction for returns, they increase confidence which drives more sales. Reducing friction for returns absolutely has to happen as more sales shift online. Currently the economics of returns for online purchases don’t work and are not sustainable. We tend to see 30 percent returns for online apparel versus 5 percent for in-store. So the cost of those returns is huge, even more so when we add the extra costs for these no-box, no label options (to say nothing of the ecological disaster). The solution here is NOT to make it harder to return stuff. We absolutely need to continue to focus on reducing friction. The solution is to get better at selling consumers the right stuff that they won’t want to return. We’re still in the first inning of digital commerce, and we’re frankly not very good at it yet. But it’s easy to imagine many solutions to the “selling stuff that consumers want to keep” problem: better product content, 3-D product… Read more »
Steve Dennis
BrainTrust

The battle for market share, particularly leveraging convenience, keeps escalating and increasingly seems like a race to the bottom. And as Seth Godin says, “the problem with the race to the bottom is you might win. Or worse, finish second.” Returns are a major problem for retailers and consumers alike, so in one sense it makes sense to try to smooth over this discordant note in trying to deliver a more harmonized customer experience. But the marginal economics of this are tough. I’d rather see them offer it as a tiered benefit to Walmart+ members. In this way it could drive more membership and there is a far better chance that the customer lifetime value dynamics work to Walmart’s favor.

Steve Montgomery
BrainTrust

Free was always a magical word in retailing. Then it was made even more magical by combining it with home and delivery. The phrase “free home delivery” went from being a winning strategy to a needed-to-play strategy for retailing in short order.

Now Walmart has moved the goal line once again by combining free returns and home pickup. Will consumers love the concept? There’s no question about it. The question is, can anyone make money with free fast delivery and free returns? I have serious doubts about it. While this program will be something that customers will love, will the accountants love it at the end of the quarter?

Suresh Chaganti
BrainTrust

This is a new way to race to the bottom. The race is on features and convenience. Amazon and Walmart can battle it out, but there will be collateral damage on other retailers as the customer expectations are set. The reality is, there is no technology play to do this economically. Humans are needed and service is the biggest expense and it is not scalable. It is going to cost Walmart a pretty penny, but they are going to differentiate from Amazon.

Gene Detroyer
BrainTrust

This is not a race to the bottom. It is a race to the top in terms of who can give the customer the most valuable services.

Dave Bruno
BrainTrust

Oh no! We all know how hard it is to charge shoppers for something once we’ve given it to them for free, even if done so temporarily under the stress of a pandemic (although I see no indication that this is a temporary practice). We’re still suffering from the margin impacts of free shipping, and now we want to add free return pickups? The logistics of returns are so much more difficult to optimize than shipping (translation: more costly), and there are so many better options: curbside, centralized mall locations, partner stores, etc. Who but Walmart and Amazon can truly afford this?

Gene Detroyer
BrainTrust

Curbside, centralized mall locations, partner stores, etc. Maybe better for the retailer, but not for the customer.

Dave Bruno
BrainTrust

Agreed, Gene, but I would argue that the aforementioned options are a good compromise that makes life “easier” for shoppers while maintaining “reasonable” margin impacts for retailers — that’s my two cents, anyway. :^)

Peter Charness
BrainTrust

Back hauling so to speak is one of the most efficient forms of transport. The truck is paid for, it’s already burning the gas, yes it will take longer and yes the driver will need to make more stops but really — it’s not horrendously more expensive. It will even get the goods back to the retailer and (where appropriate) on the shelf again faster. Now if they would extend the service to include cardboard pick up for reuse (but only if they are already stopping at that house with a new delivery) we’d have a virtuous circle. Great service idea from Walmart.

Gene Detroyer
BrainTrust

What competent logistics guy is not always looking for back-hauling opportunities? There was a great Harvard case study I remember from school (over 50 years ago) that dealt exactly with this.