Retail returns: Stats reveal what consumers hate and how to tackle the problem
New research from SAP Emarsys reveals customer sentiments about retail returns, and the data isn't rosy. Discover the top pain points and how to fix them.
If you tried to return something you bought online last year, the retailer may have surprised you by telling you not to bother sending it back. No need to package it up and drop it off at the local shipping store. Just keep it, gift it, donate it, toss it, or whatever you want – and still get a refund.
The trend has been around for a few years, but gained momentum since the end of the pandemic. In fact, more than half (59%) of 21 major retailers surveyed have adopted “keep it” return policies, up from 26% in 2022, according to research by returns services firm goTRG.
A separate survey by Narvar found that 75% of shoppers have been offered a “keep the item” return at least once.
Why are keep it return policies so popular now? Retailers have a lot of good reasons for offering them, but need to weigh them with the downsides.
“Keep it” return policies aren’t for everyone and everything
Keep it, or returnless refund, policies allow online shoppers to hang onto items they’ve ordered rather than shipping them back for a refund at the retailer’s expense.
Such offers are not for every customer, however. In most cases, sophisticated algorithms offer such perks to top customers who’ve spent a lot of money and haven’t displayed patterns of abusing return policies.
About 70% of these policies are limited to purchases of less than $30 or to heavy and bulky items, says Fara Alexander, director of brand marketing at goTRG. Retailers might also tell a customer to just go ahead and keep an item like a mattress where there might be sanitary concerns.
Most retailers don’t advertise these policies because they don’t want shoppers to start viewing them as “table stakes” or the way returns are always managed, Alexander adds.
5 retailers telling customers to keep it
Many major retailers have embraced keep-it policies, at least in part. They include:
- Amazon: The e-commerce giant actually implemented such policies way back in 2017 as an option for merchants in order to cut the time and cost of managing returns shipping and processing. At the time, Amazon said the shopper-friendly approach could also encourage consumers to keep doing business with the merchant.
- Target: Known for relaxed return guidelines, Target’s online policy says nothing about keep-it. But the store is widely reported to be one of those offering the option.
- Walmart: The nation’s largest retailer, Walmart hasn’t been shy about talking up the value of its keep-it policy. In fact, Walmart Marketplace includes a guide to help stores configure their returns technology to include it.
- Wayfair: The online retailer is one of several taking a different tactic to keep-it policies, according to Alexander. Instead of telling customers to hang onto their purchase for a full refund, they instead credit back a portion of the product’s original purchase price.
Keeping cost down, reducing return impact on inventory
E-commerce policies like keep it exist because shoppers expect to be able to conveniently return products without having to pay for it. Retailers know they must meet this expectation through lenient returns policies or risk losing business. But they also know shipping costs for returns could easily spin out of control without strategies for offsetting them.
Last year, the total return rate for all merchandise sold was about 14.5% or $743 billion, according to the National Retail Federation. That’s about 14.5% of all merchandise sold — more than Walmart’s annual sales of $638.8 billion.
Ideally, retailers would love for customers to buy online and return in-store (BORIS) since that minimizes their returns costs while creating opportunities for shoppers to make another purchase. To some degree, they’ve been successful getting shoppers to go down that path with nearly half (49.7%) of all in-store returns having originated online.
But BORIS alone isn’t enough to offset the estimated $600 billion retailers are spending each year to return items to warehouses. They can’t risk ticking off buyers by charging fees for returns. So, they turn to a mix of other, more customer-friendly policies like keep-it to anchor their return policies.
Beyond cost considerations, keep-it policies also help reduce the impact of returns on already bloated product inventories. In November, two-thirds of 30 retailers had inventory turnover below those of their competitors, suggesting either slow sales or excess stock, according to a Reuters analysis.
Excess inventory can impact financial performance due to the high cost of warehouses to store items. It can also affect operational efficiency since workers have to maintain and move products from place to place.
The high cost of e-commerce returns: A trillion dollar problem
Marketing metrics often overlook the high rate of e-commerce product returns, which is extremely costly to retailers. As global e-commerce continues to grow, the amount of returns is expected to cost retailers more than a trillion dollars a year.
Return policy pitfalls for retailers
Ultimately, keep-it return policies are far from a solution to the problem of retail returns. Key challenges include:
- Fraud: The risk for scammers gaming keep-it policies is high. Return policy abuse already contributed $101 billion in overall losses for retailers in 2023, according to NRF. For every $100 in returned merchandise, retailers are thought to lose $13.70 to return-related fraud. Retailer algorithms watch for indications of abuse or outright fraud. The algorithms also are periodically adjusted to keep scammers guessing, experts say. But the possibility of fraud slipping between the digital cracks remains.
- Logistics: Even if they allow customers to keep items, retailers still must track, represent, and process those transactions as returns to accurately reflect them in their books. This can add a layer of complexity.
- Operating costs: Similarly, even with customers retaining a percentage of products, there are operational costs associated with processing the returns, including administrative tasks, customer service, and potential inventory adjustments.
The future of keep-it returns policies
Is keep-it a short-term trend or a long-term strategic approach? Given e-commerce leaders such as Amazon have had keep-it policies for a while, it stands to reason they are more than a fad. Determining whether they stick around, however, likely comes down to risk vs. reward considerations.
In other words, if the expense of administering keep-it policies rises above what it costs to simply pay for shipping returns, retailers are likely to abandon the approach. Conversely, if the rewards of such customer benefits remain greater than the risks, retailers will probably continue offering them.
“Keep it will always be around,” says Alexander. “Retailers will always want to minimize net losses from returns shipping and keep-it will help with that.”