Does the shirt you ordered fit well, but the color isn’t quite what you expected? The chair that was just shipped to you arrived on time, but it doesn’t match the rest of the bedroom set?
Returning such items can be a pain, but what if you don’t have to?
And to brighten your day, the retailer will always issue a refund.
It’s not entirely a new concept in the retail world, but many businesses have embraced the policy in recent weeks. If you’ve made online purchases from retail giants like Target, Walmart, Gap, and American Eagle, you may be allowed to keep those unwanted items while getting your money back.
While it can be a great way to build customer loyalty, it’s also become an economic necessity for retailers large and small who are dealing with rapidly growing inventory. For some, it is simply cheaper to issue a refund than to absorb the costs of restocking and reselling the returned item.
“Rising shipping and logistics costs have far outpaced manufacturing costs over the past year,” said Rebecca Wang, a professor at Lehigh University’s College of Business. “So for some items, paying for their return shipping and restocking them will cost more than just giving them away for free, especially for these mega-retailers.”
As consumers gradually shifted from traditional brick-and-mortar stores to shopping online before the COVID pandemic, this trend grew exponentially as people were stuck at home. He still needs to slow down.
Wang said that since customers couldn’t shop in person, they would order multiple items, with the option of keeping one item and returning the rest.
“All of these changes mean retailers are getting more online orders, which means more returns. On top of that, shipping and transportation costs have increased dramatically over the past few years,” she said.
On Target’s earnings call in May, executive vice president and chief operating officer John Mulligan admitted that tough conditions and high costs in the freight market have been tougher than expected.
“First quarter freight and transportation costs were hundreds of millions of dollars higher than our already lofty expectations,” Mulligan said. “And for the full year, we now expect about $1 billion in additional freight costs, even compared to our expectations just three months ago. Among the reasons for this additional pressure, record fuel costs are an important driver, as well as the global shipping market, where costs have remained exceptionally high and where we sometimes have to rely on the spot market to secure adequate capacity. .
According to the National Retail Federation, retail returns have fallen from $428 billion to $761 billion between 2020 and 2021, and inflation has compounded the problem.
As long as consumers continue to shop at record rates, retailers will need to continue to stock goods to meet extremely high levels of demand, NRF spokeswoman Karlie Frank said.
Meagan Knowlton, director of sustainability at Optoro, a reverse logistics company whose customers include Best Buy, Plow & Hearth and Staples, said the rapid growth in returns is “a massive and growing problem”. Not having to restock an item is a simple solution to fill an already full warehouse.
“Over the past few years, we’ve seen brands and retailers explore ‘just keep it’ returns as a strategy to help manage the volume and cost of items that are returned each year,” she said.
“In many ways, it’s a simple solution. For convenience-focused shoppers, maintaining returns makes the retail experience frictionless, which, in turn, builds customer satisfaction and loyalty. »
Indeed, Wang said such a policy is a wise move in an increasingly competitive market, as the internet offers consumers a seemingly endless choice of places to shop. A happy customer can use word of mouth with friends or write a good online review, giving the retailer free publicity.
“The online space is still growing, yes, but it’s also getting more competitive,” Wang said. “From a customer’s perspective, if a retailer potentially offers free items when requesting a return, other retailers almost have to follow suit to stay competitive. Otherwise, they might not appear in the customer’s consideration set when they make their next purchase decision. Giving back items could also help retailers spread word of mouth among their network of customers. »
Also, merchants build goodwill, Wang said, by giving suggestions to customers who feel stuck with an unwanted item despite receiving a refund. For example, the animal supplier Chewy may suggest that the item be donated to an animal shelter.
“Depending on the reason for the customer’s return, a retailer might remind them to give the item back to a friend instead of throwing it away, prompting interesting stories and free publicity for the retailer,” she said. “It could also be a ‘thank you’ to loyal customers if the reason for the return is not related to product quality or fit. It could also be a way to positively engage with the customer in a negative situation, as they don’t have to worry about returning the item. »
Optoro’s Knowlton said that while “just keep it” returns are an effective solution to the reverse logistics problem, there are two considerations retailers need to be mindful of.
“The first is educating customers about reuse options or proper disposal of unwanted items – whether that’s providing resources for recycling programs or donation centers to which returns can be sent” , Knowlton said. “The second is to be methodical in assessing which items can be kept by the customer to minimize financial loss. Typically, these items are less expensive and therefore cost more to process via reverse logistics than just holding them for customers. »
It is not a general policy. Many returns will still have to come back, depending on customer demand.
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Products that are not normally eligible for return include those that have a shelf life. Durable goods and clothing could be restocked and they could be sold as new if in good condition, or as open box items. Some may return to the manufacturer or liquidators to be sold at a loss. Some will simply throw them away.
Other items merchants won’t want to pick up include those that are being phased out or aren’t bestsellers.
“They don’t give away all the items,” Wang said. “They do this with items that are expensive to reverse logistically relative to their selling prices, items that they might struggle to sell or resell, or products and brands that they no longer plan to stock or to sell.
“For example, if the data analyzes show that a product is constantly being returned, there may be something undesirable in its characteristics or perhaps even in the whole range or the brand, so that is a way of get rid of its inventory,” Wang said.
As businesses perfect their online businesses in the years to come, the possibility of keeping an unwanted item will be just one of many customer service strategies.
“Ultimately, ‘just keep it’ returns is a new tactic, and over the next few years we’ll start to see retailers perfecting how and when they use it,” Knowlton said.
Morning Call reporter Evan Jones can be reached at [email protected].