The retail industry is experiencing a significant shift in focus towards returns and reverse logistics. This change is driven by several macroeconomic trends—including increasing digital return volume and inflationary pressure (higher carrier rates, higher labor expenses, etc.)—which are spiking operational costs. In fact, managing returns is more expensive and complex than ever before, prompting retailers to update their policies in a variety of ways.
Charging for returns
With shipping costs on the rise (and given that much of what gets returned is rarely resold for full value) retailers are more willing to use “return fees” as a way to both discourage returns and offset the cost of processing returns. In 2022, Narvar found that 41% of retailers now charge some kind of return-shipping fee—up from 33% in 2021. Examples include:
- American Eagle Outfitters → $5 deducted from refund.
- Eddie Bauer → $7 deducted from refund.
- Lands’ End → $6.95 deducted from refund.
- Saks Fifth Avenue → $9.95 deducted from refund.
- Zara → $3.95 deducted from refund.
Tightening return windows
Shortening return windows entices customers to complete their returns in less time (e.g., 15 days versus 30 days), making it easier for retailers to recapture revenue through resale and cut costs by saying “no” to returns that come outside the shortened window. J.Crew, as an example, recently cut their return window by 50%, dropping it from 60-days to 30-days.
Offering perks to the shoppers who matter most
Not all customers are worth the same to your business—some shoppers are worth more than others. To that end, many brands are modifying their return policies to cater to customers in every echelon, with more lenient policies for frequent or high-value shoppers, and more stringent policies for first-time buyers or low spenders. For example, Ulta Beauty offers receipt-free returns—but only for shoppers in its Ultimate Rewards Member program.
Incentivizing customer behavior through return policies
Retailers are also leveraging return policies to incentivize specific customer behaviors. For example, Saks offers free return shipping within 14 days of purchase to encourage customers to return items faster, while also reducing the risk of goods being returned in an unsalable state or at risk of markdown.
DSW waives its $8.50 return fee if shoppers are willing to join its Gold or Elite Rewards programs, which allows the footwear giant to better collect data regarding shopper preferences and habits, which can be leveraged in the future for more persuasive marketing.
Even Amazon—famed for its loose and free return policies—is planning to charge a fee for customers who opt to drop their returns off at a UPS location, when an Amazon-owner partner location (e.g., Whole Foods) is closer. This policy shift will push customers to use a return network that’s easier for Amazon to manage, lowering their costs without damaging the shopper experience.
Softening the blow from returns
Returns aren’t going away, but there retailers can still help themselves in a couple of key ways:
- Use data to improve merchandising, implement shorter return policies, and enforce shopper compliance.
- Offer exchanges and e-credit options to retain revenue within the retailer ecosystem.
By taking a proactive approach to managing return policies, retailers lessen the footprint of returns on the bottom line, while providing a more streamlined experience for their customers.
David Morin is the VP of Customer Strategy at Narvar, working closely with renowned retailers like Nike, Sephora, lululemon and a range of other global and D2C brands. He’s spent over a decade in retail & tech at Nordstrom, Neiman Marcus, and HP’s Immersive Computing division.
