As the holiday season winds down and disappointed recipients contemplate returning undesirable gifts, a growing trend of fees associated with returns is casting a shadow on the process, adding an extra layer of disappointment for consumers.
While free returns have become a norm for many Americans, a surge in return-related costs is impacting retailers’ profitability. Major brands such as Macy’s, Abercrombie, J. Crew, and H&M have implemented shipping fees for mail-in returns, challenging the expectation of cost-free return services.
This shift is not limited to prominent mall brands; an overwhelming 81% of merchants now impose fees for various return methods, according to Happy Returns, a logistics company specializing in returns.
Even retail giant Amazon has not remained immune to this trend. The e-commerce giant is now charging customers a $1 fee for returning items to a UPS store if there is a closer Whole Foods, Amazon Fresh grocery store, or Kohl’s to their delivery address. Amazon, which owns Whole Foods and Fresh and has a partnership with Kohl’s, has also taken the step of flagging “frequently returned” products on its website. This badge is added to listings of items with “significantly higher return rates for their product category,” according to an Amazon spokesperson.
The surge in return rates, fueled by increased online shopping, has become a challenge for retailers. Consumers are more likely to return items they haven’t seen or tried on in person, contributing to a notable increase in return rates. In 2022, customers returned nearly 17% of their total purchases, amounting to $816 billion, as reported by the National Retail Federation. This figure marks a significant rise from the 8% return rate observed in 2019.
For retailers, absorbing the costly shipping fees associated with returns is a financial burden. Moreover, returned items often find their way back to retailers’ warehouses or shelves, requiring markdowns for resale, further squeezing profit margins. In some cases, returned products may end up in liquidation warehouses or even landfills, posing environmental concerns.
Attempting to address this challenge, some stores are adopting a different approach. Rather than encouraging returns, they allow customers to keep certain items that are costly to ship back. This applies particularly to low-priced, bulky items such as furniture, kitchen appliances, home decor, baby chairs, walkers, strollers, and similar items.
Despite a rise in spending during the holiday season, with retail sales increasing by 3.1% from November 1 to December 24 compared to the same period the previous year, according to Mastercard SpendingPulse, the imposition of return fees signals a significant shift in the landscape of post-holiday consumer interactions with retailers.
