Return Fees Mean Lost Business for 1/3 of Companies

Online return fees appear to be both a blessing and a curse for retailers.

While charging shoppers for sending back items has reduced returns, a report Thursday (Oct. 26) by The Wall Street Journal (WSJ) says these policies could be driving away customers as the holiday shopping season approaches.

The report points to a survey by logistics company Happy Returns showing that one-third of companies say they have lost customers since they began charging consumers fees to return items that they purchased online.

Tom Enright, an analyst at research firm Gartner, told the WSJ that retailers risk turning off customers with return fees.

“By bringing in a returns fee, you’re at very best going to lose customers” as a retailer, Enright said. “You’re certainly not going to gain anyone because you won’t attract people to buy from you by making it more expensive for them to do so.”

As the WSJ notes, returns had always been something of a necessary evil for merchants: the added shipping and logistics cost was worth attracting customers and bolstering sales.

Then came COVID, and a flurry of new eCommerce sales. Shoppers grew accustomed to ordering, say, multiple garments in different colors and sizes to try on at home and returning the ones they didn’t like.

The report cites data from Appriss Retail and the National Retail Federation showing that consumers sent back around 16.5% of items they purchased online in 2022, compared to 9.6% in 2019.

PYMNTS explored the return fee issue last month, noting that these charges offer benefits and disadvantages for retailers.

On the plus side, these fees can reduce the frequency of returns, letting retailers recoup expenses on things like restocking, refurbishing and reselling returned items.

“Additionally, it fosters a climate of more deliberate customer decision-making, potentially heightening overall satisfaction as customers are more inclined to keep items they genuinely desire,” the report said, adding that fees can enhance profitability and deter fraud.

“However, fees may hurt a retailer’s image, as some customers may perceive return fees as inhospitable or punitive,” PYMNTS wrote.

In fact, a recent PYMNTS Intelligence report shows that 33.4% of American consumers consider free online returns — meaning here that retailers provide no-cost online returns with printable shipping labels — to be very or extremely important.

With that in mind, some brands and retailers are trying to minimize return costs and promote repeat purchases.