The holiday shopping season is always closely followed by a spike in gift returns.
But this year it may be more difficult to bring things back for free or at a lower cost.
About 60% of retailers said they were making changes to existing return 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 most recent data from the National Retail Federation.
For all of 2021, the return rate was approximately 16.6% of total U.S. retail sales, or $761 billion in merchandise returns, and in 2022, fewer businesses are in able to afford such a high price.
With rising costs compressing 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 returns management company.
Expect shorter return windows, restocking fees
A postman holds Amazon.com packages while preparing a vehicle for deliveries at a United States Postal Service fulfillment and distribution center in Washington, DC
Andre Harrer | Bloomberg | Getty Images
Stores such as Gap, Old Navy, Banana Republic and J. Crew (which was once well known for its generous return policy covering the life of a garment) have shortened their regular return windows to less than a year. month. Year-end shoppers, however, get a reprieve: J. Crew and others are currently offering extended holiday returns and exchanges.
At Anthropologie, REI, and LL Bean (which also promised lifetime returns), there’s now a fee — around $6 — for mail-in returns.
“These adjustments in return policies are not there to cover costs,” Kieboom said. “They are really there to dissuade the consumer from coming back.”
Rising costs squeeze margins
With the explosion of online shopping during the pandemic, “free returns was a very convenient model that the customer appreciated,” said Erin Halka, senior director of Blue Yonder, a supply chain management company. Now, with higher labor and shipping expenses, it’s costing retailers “a huge amount of money” to maintain, she said.
“Charging returns is a way to help cover some of that cost,” she said. “It can also deter customers from overbuying, as at least 10% of returned goods cannot be resold.”
Just as retailers struggle with excess inventory, “often returns don’t end up on shelves,” posing a problem for retailers struggling to streamline spending and improve sustainability, Kieboom said.
“The supply chain is designed to go one way,” said Lauren Beitelspacher, associate professor and chair of Babson College’s marketing department.
“The more money retailers lose on returns, the more they have to make up for it by raising prices,” Beitelspacher said.
“Changing the return policy is an easier pill for the customer to swallow than increasing the purchase price.”
How to avoid return shipping
Still, shoppers love free returns almost as much as they love free shipping. In fact, 98% of consumers said free shipping was the most important consideration when shopping online, followed by more than three-quarters who said the same about free returns, according to a recent PowerReviews report. . Affluent shoppers were even more likely to favor a free returns policy.
If the return option is important, get to know the policies before you buy, experts say. Often it’s not immediately clear, Halka said. “You usually have to dig into the fine print.”
Expect limitations on what can be returned and when, she said. “A 30-day window is now typical.”
This time is well used to make the best possible decision regarding your purchase. “You need to find the return policy that works best for you,” Kieboom said.
For those looking to avoid returns altogether, in-person shopping may be the answer, Beitelspacher suggested. “The majority of returns come from regret because it’s not what we expected. Shopping in person minimizes that gap between expectation and reality,” she said.
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