The Rise in Retail Return Fees

Consumers are conditioned to free returns. But as retailers introduce fees, shoppers may need to start reaching into their wallets to send back purchases. Plus, do you have financial anxiety?

Why more fashion retailers are charging return fees

Some of the biggest business winners of the Covid-19 pandemic were e-commerce retailers. In the US, Census Bureau data shows $571.2bn (£473bn) of goods were sold online in 2019. The next year, that figure hit $815.4bn: a 43% climb. In 2022, annual US e-commerce spending hit the $1tn mark for the very first time.

But the sheer volume of goods sold and shipped from the warehouses e-commerce giants, such as Amazon and H&M, came with a price for retailers. Roughly 17% of online purchases were returned in 2022, according to data from the National Retail Federation, down from 21% the previous year. When retailers rode the pandemic wave of online shopping growth, the volume of goods coming back swelled exponentially.

Their answer? Return fees. 

Since the pandemic began, fast fashion retailers have especially taken up the practice. In late September, fashion giant H&M began charging customers £1.99 ($2.40) to return online purchases. The company joins many other fashion brands asking customers to pay up: in May, Zara introduced a return fee of £1.95 for items sent back via mail. Similarly, in the US, clothing retailer American Eagle charges $7 to return purchases; JCPenney, $8; Saks Fifth Avenue, $9.95; and TJ Maxx, $10.99. Even $100bn fast fashion brand SHEIN added return fees (although the Chinese e-commerce giant still offers free returns for first purchases).

Many retailers of expensive or bulkier goods like furniture charged for returns before the pandemic, according to Regina Frei, an associate professor of digital economy at the University of Surrey, UK. Returns fees were not limited to these purchases; about one third of omni-channel retailers charged these fees before 2020, says Heidi Isern, vice president of experience at Narvar, a US-based post-purchase customer software platform. 

Yet today, adds Isern, the practice has gone mainstream: Isern says around 40% of online retailers charge some sort of return fee for shipping an item back to a warehouse, repackaging it or disposing of it. Some retailers charge a fee, regardless of whether it comes back in-store or online, but most are willing to let customers return an item purchased online to a brick-and-mortar location for free.

The trend may seem like a way for companies to squeeze consumers as online shopping continues to generate major revenue. Yet retail experts say return fees are a balancing act between retailers' thirst for profits and the record-returns problem still plaguing the e-commerce industry.

→ Read more from Brennan Doherty

Financial anxiety: The alarming side effect of inflation

Worrying about finances is nothing new. But as inflation has taken hold, and the cost of living has spiked without wages keeping pace, more and more people are starting to panic about their money. Financial anxiety has set in for billions of people – including some who haven't felt the acute pressure before.

The term may not be familiar, but you might know the feeling: "the stress, worry or unease people experience due to their financial situation, including concerns about money, debt, expenses and financial stability", says Jenna Vyas-Lee, a clinical psychologist and co-founder of mental-health clinic Kove. Financial anxiety can affect anyone from those on the lower end of the socioeconomic scale living paycheque to paycheque, to those considered more traditionally 'well-off'.

"Unemployment has been remarkably low since the pandemic, so most of the economic pressure comes from incomes not keeping pace with inflation, rather than people losing their jobs", says Kerry Papps, a professor of economics at the University of Bradford, School of Management UK. So, while many people are still employed, they find that their salaries are stretched.

The ripple effects are manifesting around the world, but the UK is bearing the brunt of this problem, with prices set to rise faster in Britain than any other advanced economy in 2023, at 7.2%. As the Bank of England uses interest rates to fight inflation, mortgage rates have ticked up, with many people seeing huge increases to their monthly outgoings. In the US, inflation is falling faster, but Papps says financial anxiety is rampant in America as well, particularly among people at the lower end of the earning scale, due to a lower minimum wage relative to the UK.

The uncertainty these situations breed is textbook anxiety, says Vyas-Lee: "Not having a plan, not being able to execute a plan and not being where you wanted to be with respect to your own goals can cause severe anxiety, irrespective of how much money you have, or your social standing.

→Read more from Elizabeth Bennett

Thanks for reading this week. See you next week.

– Meredith Turits, Editor, BBC Worklife