“Free Returns” has become the new “Free Shipping,” which is creating a massive logistical headache for retailers, particularly in the weeks after Christmas.
This year, shoppers in the US returned 14.5% of the items they purchased, valued at $743 billion. That’s nearly double the return rates of pre-pandemic 2019. One third of shoppers now make returns part of their shopping strategy, buying multiple items, knowing they’ll return some later.
As Gartner retail analyst Tom Enright put it in the WSJ a few days ago, “we’re headed for a trillion dollar problem here.”
The economics of product returns are brutal. The WSJ reported that only 30% of all returned items are resold and Enright estimates that retailers are losing 50% of their margins on returns.
A recent survey from logistics company goTRG found that 49% of retailers believe product returns are a “severe problem”, up from 2% just a few years ago.
That has led some retailers like Zara and H&M to start cracking down on returns this year with shorter return windows, return fees, and even “keep it” policies.
This will be a tricky challenge for brands and retailers to navigate. When shoppers have been trained to expect “Free Returns” as table stakes, it’s hard to pull back. And the returns process is every bit a part of the customer experience as the purchase.
Like unsustainable price promotions, I think that “Free Returns” are emblematic of the “race-to-the-bottom” dynamic in retail. What starts as a point of difference becomes background noise.
This is a good reminder for brands and retailers to think about what they stand for beyond the lowest price or biggest deal.
Here are a few related cartoons I’ve drawn over the years:
