Retailers tell their customers to keep their returns
Anyone who has ever tried to return an order from Chewy likely knows the drill. One of its representatives will tell you to keep the product and donate it to a local shelter or give the unwanted item to a friend whose pet could use it.
Chewy’s experience is growing less unusual by the day, however, as retailers looking to reduce costs and clear out warehouses and stores of excess inventory tell customers to just keep those unwanted purchases.
“It would be a smart strategic initiative,” said Burt Flickinger, managing director of retail consultancy Strategic Resource Group told CNN.
Mr. Flickinger said the math of returns shows it has more minuses than plusses for retailers.
“For every dollar in sales, a retailer’s net profit is between a cent to five cents. With returns, for every dollar in returned merchandise, it costs a retailer between 15 cents to 30 cents to handle it,” he said.
Returns have become an ongoing operational challenge for retailers that are already seeing margins squeezed as a result of delivering online orders to customers’ homes.
Merchandise in 2021 was returned to the tune of $761 billion, according to the National Retail Federation and Appriss Retail. The rate of total returns was 16.6 percent, up from 10.6 percent in 2020. The rate of online returns was 20.8 percent, which was in line with previous years.
Excess inventory means markdowns at retail to move merchandise. When more products are sold, a greater number are bound to be returned, as well. This leaves retailers deciding if it makes sense to process returns, which could cost between 20 percent and 65 percent of the cost of goods sold, according to UPS, or just tell customers to keep it.
Retailers are increasingly turning to technology to try and cut back on the number of items returned.
Amazon.com earlier this month debuted its Virtual Try-On for Shoes, which uses augmented reality technology to help customers visualize how they will look in footwear from a variety of angles.
Walmart in March rolled out its own try-on technology for clothing. The technology came to the retailer following its acquisition last year of Zeekit, a virtual fitting room firm.
- Just keep your returns: Stores weigh paying you not to bring back unwanted items – CNN
- Retail Returns Increased to $761 Billion in 2021 as a Result of Overall Sales Growth – National Retail Federation
- Will AR try-on sneaker tech put Amazon a step ahead of its rivals? – RetailWire
- Will try-on tech be the right fit for Walmart’s fashion business? – RetailWire
- Retailers give customers refunds and tell them to keep items – RetailWire
DISCUSSION QUESTIONS: Do you expect to see a significant uptick in the number of items that retailers tell customers to keep rather than return? What do you see as the most effective way to cut returns without limiting sales?