Retailers roll out stricter return policies ahead of the holidays
The holiday shopping season is always closely followed by a spike in gift returning.
But this year, it may be harder to bring things back for free or at a low cost.
Roughly 60% of retailers said they’re making changes to existing returns policies, with fewer promising free returns, according to a recent survey of retail executives.
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On average, retailers expect about 18%, or $158 billion, of merchandise sold during the holiday shopping season to be returned, according to the National Retail Federation’s most recent data.
For 2021 overall, the return rate was about 16.6% of total U.S. retail sales, or $761 billion in returned goods, and in 2022 fewer businesses are in a position to be able to afford such a hefty price tag.
With rising costs squeezing margins, many retailers are rethinking their return policies, shortening the return window and even charging a return or restocking fee, according to Spencer Kieboom, founder and CEO of Pollen Returns, a return-management company.
Expect shorter return windows, restocking fees
A letter carrier holds Amazon.com packages while preparing a vehicle for deliveries at a United States Postal Service processing and distribution center in Washington, D.C.
Andrew Harrer | Bloomberg | Getty Images
Stores such as Gap, Old Navy, Banana Republic and J. Crew (which was once well known for a generous return policy that spanned the lifetime of a garment) have shortened their regular return windows to within a month. Year-end shoppers, however, are being given some reprieve: J. Crew and others are currently offering extended holiday returns and exchanges.
At Anthropologie, REI and L.L. Bean (which also once promised lifetime returns), there’s now a fee — all around $6 — for mailed returns.
“These adjustments in return policies are not there to cover costs,” Kieboom said. “They’re really there to deter the consumer from returning.”
Rising costs squeeze margins
With the explosion of online shopping during the pandemic, “free returns was a high convenience model the customer appreciated,” said Erin Halka, senior director at Blue Yonder, a supply chain management company. Now, with higher labor and shipping expenses, it is costing retailers “a tremendous amount of money” to sustain, she said.
“Charging for returns is one way to cover a portion of that cost,” she said. “It also can deter customers from overbuying, since at least 10% of returned goods cannot be resold.”
Just as retailers struggle with excess inventory, “often returns do not end up back on the shelf,” and that causes a problem for retailers struggling to streamline expenses and enhance sustainability, Kieboom said.
The supply chain is designed to go one way.
Lauren Beitelspacher
associate professor at Babson College
“The supply chain is designed to go one way,” said Lauren Beitelspacher, associate…
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