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Why you're going to pay for the online return mess

Allison Smith, Katie Linsell, Bloomberg News on

Published in Science & Technology News

One of the foundations of online shopping has been free returns, but not anymore.

After years of subsidizing them, more retailers are charging customers to send back unwanted goods. It’s a risky move because shoppers have become accustomed to buying an item in multiple sizes and colors and returning what doesn’t fit for free.

The list of retailers cutting back includes Zara, Abercrombie & Fitch and Boohoo. In the US, the number of large retailers requiring a return fee has jumped from 31% to 40% this year, according to research by Narvar, a logistics software firm.

“I do expect others to follow,” said Honor Strachan, an analyst at research and consulting firm GlobalData Plc. “It only takes one, and the others will think: ‘Well, if Zara can do it, we can do it, too.’”

The pullback on returns comes after the e-commerce sector spent the past two decades removing costs from supply chains and customer service. But returns had barely been touched, leaving them as one of the few places with lots of room for reducing expenses. They are costly because of the labor to have them shipped back, inspected and put up for resale.

Investors are also clamoring for online businesses to boost profitability (or be profitable) in a shift from incessantly focusing on growth.

 

The pandemic played a role, too, causing a spike in online shopping — that has since receded — when the masses stayed away from physical stores. That meant more returns, and Covid-19’s disruptions created an inventory glut in categories such as apparel, which is expected to increase discounting and the potential for shoppers to return goods when they see better deals.

A volatile economic environment this Christmas shopping season has added to the pressure.

Consumers experiencing the highest inflation in four decades are more frugal, increasing the chances that they second guess a purchase and return it, according to Amit Sharma, chief executive officer and founder of Narvar. Higher costs for transportation, energy and labor have made returns even more expensive, raising the stakes for chains to change behavior.

“That’s the big question: How do we reset expectations?” said Sharma, who previously held senior roles at Apple and Walmart. “Everybody’s losing money on shipping and returns.”

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