Amazon and Other Retailers Implementing Return Fees
American consumers may soon have to adjust to a new reality as numerous retailers, including Macy’s, Abercrombie, J. Crew, and H&M, begin to implement fees for shipping returned products. According to Happy Returns, 81% of merchants now charge a fee for at least some return methods. This shift is aimed at offsetting the increase in return rates due to the constant growth of online shopping, with buyers returning more products that they cannot see or try in person.
Amazon, for example, has begun charging a $1 fee for items returned to UPS stores instead of Whole Foods, Amazon Fresh, or Kohl’s, the latter being closer to the customer’s delivery address. This trend is already making an impact, with nearly 17% of total merchandise purchased in 2022, valued at approximately $816 billion, being returned to stores, compared to 8% in 2019.
This growing issue is not only an economic concern. Returned products often do not make it back to retail and end up in landfills or liquidation warehouses, constituting an environmental risk. In some cases, stores choose to allow customers to keep returned products, especially for bulky, low-cost items like furniture and appliances, where return shipping costs are not economical for the seller.
The returns phenomenon has intensified during the holiday season. American consumer spending increased but at a slower pace compared to the previous year. Retail sales grew 3.1% from Nov. 1 to Dec. 24, 2023, compared to the same period a year earlier. After the holidays, U.S. consumers are expected to return $173 billion worth of goods between Thanksgiving and the end of January, prompting retailers to examine their reverse logistics process.
This process, which involves the review and coordination of returned products for possible replenishment, donation, liquidation, or disposal in landfills, is expected to become a trillion-dollar problem. Returns handling costs reach about $27 for a return on a $100 online order, and companies lose approximately 50% of their margin on returns when factoring in the initial cost of selling the item and return processing.
Retailers like H&M, Zara, and Old Navy are adapting by implementing return fees, adding online tools for demonstrating clothing fit, and alerting shoppers about commonly returned items. However, overly strict return policies could be deterring consumers from making purchases.
In response, companies like Amazon, Costco, and Target are extending return periods to accommodate consumer needs. Amazon, for instance, announced that most purchases made between November 1 and December 31 of this year can be returned until January 31, 2024, effectively tripling its standard 30-day return period.
Retail chains such as Costco and Target also maintain generous return policies, allowing customers to return items without a time limit and extending return periods for specific product lines. With the rise of e-commerce, the issue of returns is becoming an increasingly complex challenge for retailers as they seek a balance between customer satisfaction and managing the costs and risks associated with the reverse logistics process.