Retailers Don't Want Returns. Here's What It Means For Customers.

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Change your mind about a purchase and want to send it back? 

Turns out the store might not want it back either. 

A growing list of major retailers, including Amazon, Target and Walmart, are turning away returns and instead offering customers refunds and telling them to keep or donate the item instead of sending it back. The stores use AI to determine if it makes economic sense to pay for return shipping. For large or inexpensive items, it’s often cheaper to simply let customers keep the product with a refund instead of trying to send it back. 

Online Shopping Boost Drives Online Return Boost

The practice of not asking customers to send back small returns isn’t brand new, but it has definitely been magnified by COVID as a record number of people are shopping online and shipping and logistics companies are overwhelmed by deliveries. 

Processing online returns can cost retailers $10-$20 per item. For smaller items that cost less than $20, it can actually lead to a loss to take the item back instead of simply issuing a refund and moving on. The stores’ AI algorithms can also pinpoint items that the store doesn’t intend to resell. 

In normal times, 25-30% of online purchases are returned. But more customers are “bracketing” or buying the same product in multiple sizes or colors with plans to return what they don’t want or need, leading to a surge in online returns.  

In the first week of 2021, UPS accepted 1.75 million returns into its system every day. The expected nearly 9 million returns in a week is a 23% increase over last year’s holiday season. That increase in returns can be crushing for retailers and delivery services. 

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Effect On Customers

For customers, getting a refund without having to return a product can be a win-win. It saves them a trip to the post office, but it also leaves them with a small item they don’t want and now have to find something to do with. But for the most part, customers seem excited about the new systems. It’s a new way for brands to build goodwill with customers through “free” products that are actually helping the company save money. 

In recent years, retailers like Amazon and Walmart have introduced partnerships to pick up return items from customers’ homes or to return Amazon items at Kohl’s or Whole Foods. But as the pandemic rages, fewer customers want to go to physical stores. The switch to a simple refund boosts the overall experience and shows retailers are doubling down on customer safety. 

But don’t think you can order a bunch of small items and return them all in hopes of getting everything for free. Most retailers’ AI systems also take into effect a customer’s purchase history and can detect customers who abuse the system.  

Effect On Sustainability

E-commerce returns are an often-overlooked contributor to environmental struggles. This is especially true in the apparel industry, which is the second-largest polluting industry in the world. In a single year, online returns can create 5 billion tons of landfill waste and produce the same amount of carbon dioxide that 3 million cars make in a year. When multiplied by the record-setting online shopping and returns of recent months, the environmental effects can be staggering. 

When a customer returns an item, it costs the company additional labor and packaging, as well as the fuel costs and impact of sending the item back. The issue has become so large that some retailers, including Nordstrom, have incorporated returns management into their social responsibility plan. Not accepting small-item returns for shipping could make a dent in a store’s environmental impact. 

New refund practices benefit everyone: retailers, customers and the environment. In the constantly changing retail world, this is a change everyone can get behind.

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