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In 2022, returns hit an all-time high of $816 billion worth of merchandise, according to the National Retail Federation. In 2023, that number dropped to $743 billion, which seemed to suggest that retailers have made some progress in curbing what one Forbes headline called “The Billion Dollar Return Nightmare.”
With companies such as Amazon offering generous online return policies, an arms race ensued among rival retailers that has led to an avalanche of returns, creating new costs and logistical challenges. To combat these problems, here are some of the ways they are innovating this age-old retail practice.
Targeted bans
On the more extreme end, some retailers are going so far to ban customers who have frequently abused their returns policies. Target recently updated its policy to say it “reserves the right to deny returns, refunds, and exchanges including but not limited to prevent fraud, suspected fraud, or abuse.” REI has similarly banned a small number of customers from making returns, telling one local news source the bans represented “less than 0.02% of 24,000,000-plus [members].”
- Per the annual NRF survey, returns abuse and fraud costs retailers $101 billion in 2023.
Upfront fees
In an example of a more preventative measure, other retailers are charging upfront fees for online returns in order to recoup some of the costs. This practice is most common among apparel outlets such as Zara, American Eagle, H&M, and even discounters such as TJ Maxx. And despite the obvious benefit of offsetting costs, these fees have stirred some debate in the industry over its effectiveness, with some arguing that return fees hurt customer loyalty, an increasingly “scarce commodity.”
Just keep it
Meanwhile, Amazon offers a benefit that might at first appear counterintuitive: It provides full refunds for certain items without requiring customers to return their items. However, the policy only applies to items that cost less than $75, and items that are dangerous, bulky, or heavy may not qualify. Amazon has also provided few details on how the program actually works, AP reported.
Better returns
Earlier this year, Tony Sciarrotta, executive director of the Reverse Logistics Association, argued for smarter returns management, including reducing what he calls “bad returns,” where the product is in bad shape. He specifically advocated for retailers to work more closely with manufacturers to develop products that avoid customer frustrations that might lead them to a return.