Free Returns Are Starting To Disappear

Post-holiday blues are setting in for many consumers who have received less-than-satisfactory gifts this season. The disappointment amplifies when they attempt to make returns, only to be confronted with unexpected return fees. The era of free returns, a comfort that American consumers have long enjoyed, seems to be inching toward its end. Retail giants like Macy’s, Abercrombie, J.Crew, and H&M have already introduced shipping fees for mail-in returns, signaling a shift in the retail landscape.

This trend is not confined to large conglomerates only; it’s affecting businesses across the board. Almost 81% of merchants are now levying charges for certain methods of return, highlights a report by Happy Returns, a firm specializing in return logistics.

Let’s take a closer look at Amazon, an e-commerce titan. It’s now adding a $1 fee for customers returning via UPS stores located farther than a nearby Whole Foods, Amazon Fresh grocery store, or Kohl’s. This change comes in the wake of Amazon’s ownership of Whole Foods and Fresh and its collaboration with Kohl’s.

Amazon’s modifications don’t end there — the company is also flagging “frequently returned” products on its website. An Amazon spokesperson pointed out that such badges will be assigned to items experiencing significant return rates within their product category.

The surge in return rates in recent years is attributed to the rise in online shopping. There is a higher propensity for consumers to return items that they have not inspected or tested physically. Data from the National Retail Federation shows that nearly 17% of purchased merchandise was returned in 2022, a staggering rise from 8% in 2019. This equates to a whopping $816 billion in returns.

Such returns pose a significant challenge for businesses. Shipping fees for returns can be hefty, placing added pressure on retailers’ operational costs. The returned merchandise often bumps up inventory levels in warehouses or store shelves. In order to move this stock, retailers resort to markdowns, further eroding their profit margins.

The story of returned goods doesn’t always end in a warehouse or on a store shelf. Some find their final resting place in liquidation warehouses or, even worse, landfills, thereby contributing to environmental degradation. As a result, some retailers are now allowing customers to retain their low-cost bulky goods, like furniture or home appliances, due to the high cost of return shipping.

Despite these challenges, American consumers continued to splurge during the recent holiday season, albeit at a slower pace compared to previous years. Retail sales saw a modest increase of 3.1% from Nov, 1 to Dec, 24, as per the data from Mastercard SpendingPulse.