Why Retailers Are Charging Return Fees and How to Avoid Them

• Some retailers have started charging customers a fee to have their returns shipped back.
• Rising shipping costs and the labor associated with returns cost retailers millions a year.
• The easiest way to avoid paying a return fee is to bring your items back to the store in person.

The era of free returns could be coming to an end.

While online shoppers may have grown accustomed not only to free shipping but also free returns, that’s about it but Retailers can take back these items free of charge: there are costs of ground transportation and labor involved in processing, sorting and preparing these goods for resale.

Amid a financially challenging year for many retailers – and the possibility of tougher times on the horizon – some companies have had enough and are demanding that if customers want to return something, they must pay for at least part of the process.

Here’s how we got here, which retailers are changing their mindset, and what shoppers can do to avoid the cost of returns.

Why do companies now charge for returns?

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When the pandemic first shut down physical retail stores, it accelerated the rate of online shopping — and the rate of returns.

Shoppers often “bracket” their purchases, which means they buy multiple sizes or colors of the same item and return what they don’t want. According to the National Retail Federation, shoppers returned approximately $100 billion worth of goods purchased online in 2020. In 2021, that amount increased to approximately $218 billion. According to NRF, the average retailer sees $166 million in returns for every $1 billion in sales.

This creates a massive headache for retailers who need to get those items back, a process that has become more expensive due to higher shipping and labor costs, according to Erin Halka, director of industry strategy at supply chain management firm Blue Yonder.

“Not only do you have to think about the shipping cost, you also have to think about the cost of labor, maybe also the cost of cleaning this item, maybe even repairing it, repackaging it so it looks better so the next customer receives it doesn’t realize it, that it was already in the hands of another customer,” said Halka. “While we only look at the shipping aspect as a recoupment, there is so much extra work and materials that go into the workflow.”

One estimate found that it costs a business 66% of the price of a product to process a return; Another noted that a return can cost a company $10 to $20, not including freight. That means retailers lose millions of dollars on average each year by allowing you to return your unwanted merchandise for free.

Which companies charge a return shipping fee?

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Free returns haven’t always been the norm: Halka estimates it’s become a trend over the past four or five years, thanks largely to Amazon setting that standard.

But the tide is turning. Fast fashion retailer H&M recently said it plans to test a return fee to see how customers react, while Zara recently added a $3.95 fee. JCPenney, Abercrombie & Fitch, and J.Crew also charge for returns, typically around $7.50 or $8.

Of those that charge customers to return their unwanted items, the average fee is now about $7.50, Halka said.

Some companies have taken a different approach, only offering free returns to their most loyal buyers. At DSW, for example, customers are charged $8.50 for a return unless they are members of the company’s higher-tier VIP rewards programs, which require a minimum annual spend of $200.

So what can consumers do to avoid the cost of returns?

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The easiest way to avoid paying to have your unwanted items returned is to bring them to the company’s physical location, as it is highly unlikely that a retailer will charge for an in-store return. But there’s a reason for this, and it can be a trap for customers.

“From a merchant perspective, it’s definitely the most preferred because it brings the customer back to the store and provides an opportunity to convert them again,” said Hannah Bravo, senior vice president of merchant success at Loop Returns, which works with Shopify. Company collaborates to automate the returns process.

Translation: Retailers hope that when you come into the store to make your return, something else will catch your eye.

For shoppers who don’t live close to the store, or if the business doesn’t have a physical retail location, some retailers have started offering other options, such as B. the ability to drop off your return at a Walgreens store or scan a QR code and be able to leave your item at a post office in the United States. These options are also usually free and sometimes easier to access, especially in cities.

Or there are companies like Happy Returns that have “return bars” stationed across the country. Customers can bring multi-brand returns to these locations, which are set up in high-traffic areas like malls, and Happy Returns will consolidate and ship them back to the retailer. This method is cheaper for the retailer than paying to return the items individually, Bravo said.

And while it might be a little annoying to go through the hassle of dropping off a package, it can help keep prices down over the long term because if return costs continue to rise, retailers will look for new ways to make up for those losses Halka.

“To achieve these higher margins, you have to add a higher price to these items at the beginning of the purchase,” Halka said. “So that’s kind of an incentive for the customer to do their part to get those goods back without necessarily having to charge them for it.”