Is it time to shut down the free returns party?

Discussion
Photo: RetailWire
Nov 07, 2022

Retailers are shortening their returns windows and even charging return fees to mitigate rising costs.

According to reports from The Wall Street Journal and CNBC:

  • The Gap Inc. in June shortened the return window for its Athleta, Gap, Banana Republic and Old Navy brands from 45 to 30 days. J.Crew halved its return window from 60 to 30 days.
  • Zara, J.Crew, JCPenney, Abercrombie & Fitch, Anthropologie, REI and LL Bean are among those charging from $3.50 to $8.00 for mailed returns.

Consumers grew more accustomed to using their homes as dressing rooms during the COVID-19 shutdowns. The National Retail Federation reported that 16.6 percent of U.S. retail sales were returned in 2021 and online return rates were at 20.8 percent.

Returns are costly as only 48 percent of returns can be resold at full price, according to Gartner research. Higher labor, shipping and storage expenses are all increasing return costs this year.

“Charging for returns is one way to cover a portion of that cost,” Erin Halka, senior director at Blue Yonder, told CNBC. “It also can deter customers from overbuying, since at least 10 percent of returned goods cannot be resold.”

“Everybody wanted to have, like, a superliberal return policy just to be competitive with e-commerce companies like Amazon and others,” Sucharita Kodali, an analyst at Forrester, told Marketplace. Now, with about 30 percent of apparel and shoes purchased online returned, “there’s a huge carbon footprint that’s associated with it, and that’s a huge cost” overall.

A recent PowerReviews study found free returns (76 percent) second only to free shipping (96 percent) as the top consideration factors when shopping online.

Retailers are still, however, extending return policies around holiday selling, and many chains offer 90-day returns on most items. Nordstrom is among the few without a time limit or restocking fee. Nordstrom writes on its website, “We will do our best to take care of customers and deal with them fairly; we ask that our customers treat us fairly as well. From time to time we may not accept a return. There are no time limits for returns or exchanges.”

DISCUSSION QUESTIONS: Are free return policies becoming too costly? Is shortening return windows, charging return fees or some other methods the best path to deter online overbuying without alienating customers?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Offer free returns to your most valuable customers to satisfy and retain them. Offer adjusted fee returns for next best and so on. Free returns for a clearance buyer? No!"

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39 Comments on "Is it time to shut down the free returns party?"


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Neil Saunders
BrainTrust

Technically, yes it is time to shut down free returns. Practically, it is extremely difficult to accomplish as consumers have come to expect free returns and diminishing that option causes annoyance and can lead to lost sales. Strategies such as reducing windows for returns are compromises, but still need to be enacted with care. Understanding why returns are made can also help. For example, if the issue is poor sizing then having more consistency across ranges can help; if colors or fabrics not being as expected is the cause, then better photography may help.

Mark Ryski
BrainTrust

Returns are too costly, but it will be hard to close this Pandora’s box. For years, consumers have been trained to expect low cost or free returns and now it’s an expectation. At the same time, it was always a money loser and profit killer for most retailers. Something has got to give, and we’re seeing it now reflected in the changing returns policies and fees. Ultimately retailers need to make money, and I suspect that more retailers will jump on the “charging for returns” bandwagon.

Nikki Baird
BrainTrust

Like free shipping promos, I think free returns are going to be hard to shake – while retailers definitely want to save on these costs and even work to prevent the things like “bracketing” and “webrooming” that drive high returns in the first place, I can easily foresee offering free returns to loyalty customers or as a “surprise and delight” moment for a one-time high value shopper.

David Naumann
BrainTrust

Great points Nikki! I like your idea of free returns to loyal customers or some other metric that measures that customers deserve the perk. Limiting returns to X amount in a year may also help prevent frequent abusers of free returns.

Gary Sankary
BrainTrust

Returns are costly. Why would any retailer adopt these policies? To be competitive. It’s harder and harder to keep customers. Retailers are realizing they started an arms race around returns to show how customer-centric they are. Now they have to pull back. Will they? Since everyone is looking for a competitive edge, I expect that the market will determine the right balance between returns and revenue.

DeAnn Campbell
BrainTrust

Traditional retailers have long struggled to keep up with the fast shipping and free returns baseline that Amazon created and consumers have been trained to expect. It’s going to be hard to walk that back after more than a decade of consumer habit, but it’s absolutely essential if e-commerce can hope to be profitable. Even a small fee creates mindfulness in the consumer that can coax shoppers into more environmental and cost sustainable actions. Combine this with a network of partners that offer convenient physical drop off points for returns and you have a powerful way to change consumer habits for the better.

Kathleen Fischer
BrainTrust

Yes, returns are very costly but how do you change your customers’ expectations for free returns without severely affecting customer loyalty?

Jeff Weidauer
BrainTrust

Free returns are a consumer “must-have” right behind free shipping. But the whole e-commerce house of cards has reached a breaking point as the costs climb to unsustainable levels and the waste threatens to overwhelm the system.

Dave Bruno
BrainTrust

Returns are indeed vexing. Taking something away from shoppers is always a very risky proposition, but returns are really costly. Perhaps shorter free windows for all (e.g. two weeks to minimize out-of-season returns) and longer/always free returns based on loyalty status is a way to mitigate the risk?

Bob Amster
BrainTrust

Let us remember that the airlines changed the rules on accumulated mileage points for the same reason and they went from a standard 25,000 miles for a round-trip ticket to dynamic redemption. Can you find the pea now? Other loyalty programs subtly doubled the number of accumulated points required to redeem things. Who jumped ship then?

Jeff Sward
BrainTrust

Free returns were probably one of the best ever customer acquisition tools. Shopping the internet exposed people to all kinds of brands and products that they weren’t familiar with. That lack of familiarity was quickly comforted with free returns. We blinked and here we are today, with a return rate and expense structure that is killing retail profitability. So absolutely there should be a fee for returns — a nominal fee that helps offset the obvious incremental expense while it will hopefully also dissuade people from over-buying. Nordstrom’s appeal for “fair,” in both directions is a great way to put it.

Bob Amster
BrainTrust

The economics of the concept will dictate the outcome of free returns. Retailers can and should drive towards no free returns. They can do this gradually until they get to where they can lose less money and reduce the above-mentioned carbon footprint created by the concept of free returns. As to losing customers, a retailer can lose customers over this policy only to those retailers that continue questionable policies of unquestioned returns, which is not sustainable.

Paula Rosenblum
BrainTrust

Be careful what you wish for. The thought was that stores were a burden — so the more e-commerce the better. But DTC has always been fraught with returns. The catalog industry (remember that?) always had high apparel returns. So the question is, what does a retailer expect will be the outcome of charging for returns? People will certainly buy less, perhaps they’ll return less, or perhaps they’ll go to retailers with standard returns policies. They’re sure not going to head back to stores with their heads hung low.

Bad move.

Cathy Hotka
BrainTrust

They won’t like it, but retailers will have to eliminate the key reason for apparel returns — “mystery sizes.” The industry is going to have to come up with a new sizing protocol that provides transparency for consumers — and the sooner, the better.

Ken Morris
BrainTrust
The ability to bring returns back into the stores is essential. Maybe retailers need to offer one-time discounts to those making returns to encourage impulse shopping. As always, Amazon makes it tough to compete and forces other retailers to get creative in order to maintain healthy bottom lines. For clothing brands, with notoriously high return rates, they need to get better at the sizing game. This alone will reduce returns by a massive amount. First, do something about the practice of buying multiple size runs and returning ones that don’t fit. But how does one do that? Body scans and measurements don’t seem to work. Maybe a better way would be to leverage user-generated content so shoppers could finally see what others actually look like when wearing the same size. Clothing retailers really need to focus on this returns problem to profitably compete. And let’s not forget about returns fraud. While it’s not a silver bullet, serialized RFID is one tool that retailers should consider as they work to reduce the high costs associated with returns… Read more »
Georganne Bender
BrainTrust

Retailers have trained shoppers to order what they want and not worry about returning what they don’t want to keep. How do you punish shoppers for doing what you taught them to do?

Once you give customers a perk, like free shipping or free returns, it’s hard to walk that perk back without damaging the brand’s reputation.

David Slavick
BrainTrust

As e-commerce sales continue to trend up as a percent of total, returns will always be a service and associated cost metric to manage through. You want to be fair with the customer and as Nordstrom so eloquently states “be fair with us.” Nah, the consumer or shopper is always right, and they will not hesitate to do what is in their best interests. Trying to compete with Amazon is a losing proposition in more ways than one. What you DO incorporate is “liberal” or friendly terms for best of best customers – offer no cost returns to your most valuable customers in order to satisfy and retain them. Offer adjusted fee returns for next best and so on. Free returns for a clearance buyer? No!

Lisa Goller
BrainTrust

Yes, free return policies have led to exorbitant costs ($761 billion last year), as retailers already grapple with soaring expenses.

Consumers have come to expect free and hassle-free returns but it’s starting to look like the jig is up. Shorter return windows, return fees, BORIS strategies and virtual try-ons can deter overbuying and cut costs.

Ron Margulis
BrainTrust

The best way to address the return challenge is to reduce the reason for returns in the first place. If it’s a sizing, color or variety issue, there are apps available and more being developed to measure body size more accurately and position products in intended locations. For wrong, mistimed or defective items, there are analytic tools that should be applied to lower the occasions for each. It’s a huge problem and at some point a retailer’s best shoppers are going to wake up to the fact that they are subsidizing others and getting less value as a result.

David Spear
BrainTrust

The race to free shipping + free returns has now come home to roost as it’s taking chunks out of margin for every retailer. Weaning consumers off this is going to be painful and may result in a slight downtrend in revenues. The free returns party is going to end with a big hangover.

Steve Montgomery
BrainTrust

If the cost of free returns is measured as a standalone item, the answer is and has been for some time yes. The problem is this measure does not take into consideration the loss of sales that a no return policy might create.

The issue for retailers is to find the balance between the time they allow returns to be made and what, if any, charges they apply. My expectation is that this answer will be heavily impacted by the items they are selling and their customer base.