Retailers Risk Alienating Shoppers With Stricter Return Policies

Retailers appear to have made a dent in the inventory glut this fall. According to the Federal Reserve’s latest statistics, levels are down about 6% from where they were at the end of last year. That’s the good news. The bad news is that the volume of returns this season is expected to blow past last year’s record. That means another wave of goods to be disposed of.

Coresight Research recently reported that the rate of returns the weekend after Black Friday was almost double last year’s rate. According to goTRG, a returns logistics provider, the e-commerce return rate is expected to be about 20%.

In the whole year of 2021, about 16.6% of total U.S. retail sales were returned, equal to about $761 billion worth of merchandise, according to National Retail Federation (NRF) data. This year will be a record in part because retail sales are forecast to rise versus last year, by some estimates as much as 15%, driven in part by higher prices.

Whatever the final score, returns have been a major and growing headache that has gotten so costly that, according to goTRG, some 60 percent of retailers are adopting tighter return policies, and some are charging mail and restocking fees.

Gap, Old Navy, Banana Republic and J.Crew have shortened their regular return windows to a month. Kohl’s has stopped paying for shipping returns by mail. Anthropologie, REI and L.L. Bean (which once promised lifetime returns) charge fees of about $6 for mailed returns, which, according to industry insiders are only meant to deter returns.

Reining in liberal policies may prove tricky. In the recent survey by First Insight, The Discount Dilemma and Returns Risk, 75% of consumers said they would be deterred from shopping at a retailer that charges for returns and about the same percentage said they expect return windows of 30-60 days.

Reports about the amount of waste the clothing industry generates are proliferating, which will bring increased pressure on retailers to respond. It will also force retailers to re-examine a policy of “lose money, keep the customer.” AmazonAMZN
continues to encourage shoppers to try-before-you-buy, and ordering multiples of returnable items. Anyone in retail who tells the truth will admit that nearly all clothing returns are not re-sellable.

However, the inventory glut did jumpstart a new subcategory of retailer: one-off and pop-up stores run by entrepreneurs who buy pallets of returns to stock their stores.