Over 80% of merchants now charge customers a fee to ship back or return unwanted items, according to a new report from logistics firm Happy Returns. This shift in policy is driven by the rising costs associated with both the initial sale of items and the processing of returns.
Retail giant Amazon has recently started charging customers $1 to return items to a UPS store, diverting them from using Whole Foods, Amazon Fresh grocery store, or Kohl’s, which it owns or has partnership deals with. This move is part of Amazon’s efforts to cut down on return-related expenses. Similarly, other major retailers such as Zara, Macy’s, Abercrombie & Fitch, J. Crew, and H&M have also implemented shipping fees for mail-in returns, ranging from $5 to $9.95.
The increase in fees is primarily motivated by the staggering costs associated with handling returns. Last year, customers returned almost 17% of the total merchandise they purchased, amounting to approximately $816 billion, as reported by the National Retail Federation. Retailers spend an average of $27 to handle a return for a $100 item purchased online, resulting in significant financial losses for the industry.
Previously, retailers were willing to absorb the cost of returns to maintain customer loyalty. However, the magnitude of the issue has forced them to re-evaluate their policies. Retail analysts predict that if the problem persists, it could become a trillion-dollar problem for the industry.
In response to this growing challenge, merchants are turning to shipping fees as a way to offset their losses. American Eagle Outfitters, for example, deducts a $5 fee from mail-in returns that do not qualify for free returns. While customers may be frustrated by these new fees, retailers argue that they are necessary to sustain their businesses in the face of mounting return-related costs.
It remains to be seen how customers will react to these new charges. Some may choose to bear the burden of the fees, while others may opt to avoid making returns altogether. Retailers are carefully monitoring customer behavior and feedback to determine the long-term impact of these policies.
As the retail industry grapples with the challenges posed by increasingly costly returns, all eyes are on the future. Only time will tell if these shipping fees are enough to combat the growing problem or if further measures will need to be taken to tackle what could potentially become a trillion-dollar issue.
