Free returns may have once been table stakes for e-commerce, but the tables have turned. Among brands that now charge fees for at least some return methods are Amazon, Zara, Abercrombie & Fitch, J.Crew, and H&M.
A 2023 study by Happy Returns found that 81% of retailers had started charging for at least one type of return in the previous 12 months. The value of returned merchandise in the US totalled $743 billion in 2023, according to the National Retail Federation.
Now returns and reverse logistics platform Loop is introducing a feature to offset the cost of returns called, fittingly enough, Offset. At checkout, online shoppers can opt for a relatively small fee—Loop suggests $1.98—in order to not be charged steeper fees later.
Among the more than 4,000 brands that use its software, nearly 70% now charge for returns, with an average return fee of $8.50, according to Loop.
Offset “is a way for a customer to be like, ‘Okay, now I know I won’t get hit with a hidden fee that I’m not aware of right now at the time of purchase,’” Loop CEO Hannah Bravo told Retail Brew. “‘I’m going to pay $1.98 right now, and I never have to think about it again.’”
Abandonment issues: While more transparent than springing a return fee on shoppers post-purchase, highlighting that returns aren’t free at checkout could be off-putting to shoppers, leading to e-commerce’s worst nightmare: cart abandonment.
But Bravo said that in a beta trial earlier this year of about 20 brands, cart abandonment rates remained unchanged. What did change, she added, was that customers who paid the upfront Offset fee tended to return items sooner.
“A customer who opts into the Offset offering is returning faster in the return window, which is obviously a big boon for retailers to get the inventory back faster and be able to sell it,” Bravo said.
According to Loop, in the beta phase, 80% of shoppers opted in and, perhaps feeling unencumbered by future return fees, increased their average orders by almost 10%. Still—and this may be counterintuitive since Offset purchasers are effectively pre-paying for returns—overall return rates did not increase.
Free enterprise: Offset is not an à la carte product from Loop, but rather a new feature available to any merchant that purchases its return logistics software. As for how much it costs…that depends.
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With Offset Free, Loop sets the fee—most commonly, again, $1.98—collects the fees itself, and assumes the cost of shipping the returns. That plan, as the name makes clear, is free, meaning that merchants get Loop’s software gratis while Loop gets a new revenue stream.
With Offset Flex, merchants pay as much at $340 monthly for the software, and along with collecting the Offset fees determine how much to charge, or even to not charge VIP customers for returns at all.
“The merchant still pays for their return labels, just like they do today, but they’re pocketing all of that extra revenue coming from the Offset product,” Bravo said.
Best foot forward: Grant Stone, a DTC premium footwear brand, went the Offset Flex route, which accomodated its unique returns policy. Pre-Offset, as it still does today, the brand offered exchanges for free but charged a “restocking fee” of $15 for other returns.
With Offset, it offers the option of an upfront fee of $4.49 at checkout for “free” exchanges, a potential savings of $10.51, but still trumpets on a banner atop its homepage that exchanges are free.
Due to its limited applicability on the brand’s e-commerce site, namely those free exchanges, Wyatt Gilmore, CEO of Grant Stone, told Retail Brew that “we don’t consider [Offset] a revenue driver at this point.”
Gilmore even discourages regular customers from ponying up the $4.99, since they’re already sold on the brand and know their size, which can involve trial and error because Grant Stone offers each style in multiple widths.
“Don’t pay for that if you already know your size,” Gilmore said. “The likelihood of them exchanging it or returning it is very, very low, so they don’t need to opt in.”
What Gilmore said he likes about the offering is that “if you’re unsure of your sizing, this is a good option…to opt in for a fee, and now you can return or exchange without an additional fee.”
Plus, Gilmore said, the option helps link the cost of returns to the consumers making them, rather than passing the rising cost of returns on to all customers with higher prices.
“Instead of just saying, ‘Well, let’s raise our prices 1.5% to make up for the cost of shipping and UPS and damages and things like that,’” he said, “it’s a little more dynamic.”