Woman Returning a Retail Purchase

Dec 6, 2022 8:00:00 AM | Retailers Should Retailers Charge Customers for Returns?

Wondering if you should charge your customers for retail returns on products they ordered online? We dig in and offer a few alternatives to return fees.

Online shopping has become a habit for millions of people. They can order products from halfway around the world and have them delivered to their doorstep within just one or two days.

However, as convenient as that may be, the unavoidable downside for customers and retailers is when it comes down to returning online ordered products. For example, customers who ordered clothes previously used to be able to return them for free. But all that is changing since Zara started imposing return fees in May 2022.

Let’s find out why other retailers are slowly starting to do the same.

Why Are Retailers Charging Return Fee?

The main reason retailers charge return fees is to offset their cost of logistics and shipping when customers purchase online goods. Clothes retailers especially have this problem with a shopping behavior called “bracketing.” Bracketing is when customers purchase several styles or sizes of the same clothes model and return the ones that don’t look or fit properly.

Bracketing results in significant retail returns loss for retailers, as they are the ones that have to cover the cost of the return. This sheds light on the underlying issue of why returns have increased alongside the growth of ecommerce. The fact that customers are unable to see, feel, and try products they buy online.

Because of these reasons, retailers have started to charge return fees as they look to transfer the cost of doing business to their customers.

Retailers that are currently charging return fees

Clothes retailers are some of the first businesses to impose return fees. Here is a list of some of them:

Abercrombie & Fitch - Casual wear clothes retailer that imposes a $7 fee for any online return. Their in-store returns are, however, free.

Boohoo - A UK retailer that charges US customers $6 in return fees in a 28-day return window.

Dillard’s - A department store that charges $9.95 in return fees for online purchases

Kohl’s - This retailer clearly states on its website that return shipping costs fall back to the customer.

Next - The UK retailer company now charges $7 to return an online purchase.

Urban Outfitters - A Philadelphia-based retailer that charges $5 for online returns to all customers. In-store returns are still free of charge.

Woman Shopping in Clothing Store

Zara - Spanish owned online retailer has been charging $2.45 ($3.95 for U.S. Citizens) for online returns since May of 2022.

Should Retailers Charge Customer Return Fees?

Even if charging customer return fees may be a way for retailers to cut down and minimize their losses, implementing them may bring harmful long-term consequences.

According to a survey done by Canada Post, more than eight in ten shoppers say they want free returns on their online purchases. On the other hand, less than one in four e-commerce merchants in Canada offer free returns.

Although the survey was only done for Canadian residents, the situation is similar for the rest of the world.

The situation where retailers received support from customers in terms of imposing return fees was when customers were purchasing more than one size item, intending to return them later. More than 65% of customers agreed that they should cover these returns on online purchases.

According to the survey, customers that return defective or poor-quality items should not be obligated to pay a return fee.

Another article by CNBC in 2021 claimed that retailers' return fees are constantly increasing, besides consumers' attempts to find a “middle ground” solution.
Minimizing and removing customer return fees requires investment, patience, and time. Nevertheless, retailers should strive toward no-fee returns because it may result in loyal customers, decreased long-term costs, and improved brand loyalty.

Alternatives to Charging Return Fees to Customers

There may be better ideas than implementing customer return fees for retailers. Instead, they can try and focus on improving their business model and behavior toward customers in several other ways.

Offering subscriptions

If the retailers start to implement subscriptions into their service that are accompanied by additional benefits, customers may be willing to cover the expenses of returning unwanted items. The direct benefit that will counteract the cost of product returns is the advantages that a subscription might give them.

Promotions, regular and bulk purchase discounts, and constant communication with the customer may convert them to being loyal customers. Regular subscription fees can offset return costs while increasing per-customer revenue.

Encouraging direct in-store shopping

Retailers may encourage customers close to their store to make direct, in-store purchases. Direct store returns are free, as there are no postal fees to be covered by either party.

Direct and in-store purchases may also result in customers purchasing more products simultaneously, as they can browse the goods directly. This strategy is better for converting regular to loyal customers as well, as it builds trust between the brand and the customer.

Focusing on customer happiness

Retailers can increase customer happiness in several ways. The most important way is to connect to the customers on a personalized level. Personalizing means analyzing their shopping habits, preferred products, and price range.

Additionally, new technologies such as virtual and augmented reality are promising to make online shopping more immersive. With the ability to virtually try products before purchasing, the hope is to reduce the amount of bracketing and returns overall.

Data analysis can also suggest specific products that fit customer profiles and make their shopping experience easier by connecting with them more profoundly. Deeper connections result in greater conversions and higher profitability.

Lastly, by offering the most loyal customers to keep the return and refund their money is another strategy that costs retailers in the short run, but has incredible gains in the long run.

Use alternative return logistics

With the increasing rise of online retail purchases and retail returns, safe and secure distribution of goods is necessary. This is where an intermediary package delivery system like a smart locker comes in.

Companies like ParcelPort specializing in parcel transfer, logistics, and product returns are offering a promising alternative. They make the process of returning goods extremely efficient, lowering the cost for retailers while improving customer satisfaction. This is done using smart lockers as the customer-facing technology supported by an integrated logistics network behind the scenes.

ParcelPort Smart Locker

Smart lockers are lockers with built-in computers and sensors designed to simplify the deposit, storage, and retrieval of items - like product returns. They perform authentication of users, surveillance, and manage the movement of products.

Retail businesses that use smart lockers for their returns will have a chance to reduce or eliminate return fees by saving up to 46% in reverse logistics costs. This is because returned goods don’t need to be repackaged or relabeled on return and are aggregated before being sent back to retailers. A win for both retailers and the customer.

Overall, smart lockers are the next evolutionary step in e-commerce parcel logistics.

Conclusion

Every successful transaction needs to have two satisfied parties. Retailers should strive to engage with customers on a more personal level, helping them make the right decisions when shopping to minimize the return of their products.

On the other hand, customers should always try to practice honest shopping, which means they must respect the retailer and their business by not taking advantage of certain privileges.

In the end, it is up to retailers to encourage better shopping practices while embracing the latest technologies to minimize the impact of return costs.

Written By: Michael Trueman

Michael Trueman is the founder and president of Parcel Port Solutions laser focused on building North America's most extensive smart locker network.