New year, same refund policies.
Returns can be a hassle for both customers and businesses.
According to Gartner, some companies can lose up to 50% of their profit margin due to returns.
Companies have started adding fees to the process in an attempt to reduce the frequency of returns, but these fees have unintended consequences that affect both the companies and the customers. Many companies have felt the effects as roughly 1/3 of them have lost customers due to these fees. Additionally, 1/2 of customers have experienced a slowdown in the return process.
In response to the decline in customer spending and the negative impact of return fees, retailers are exploring alternative solutions. For instance, online eyeglass retailers are introducing virtual try-on features, and some clothing retailers are showcasing their products on models of different sizes. These approaches aim to help customers make more informed purchase decisions, reducing the need for returns.
While some retailers had return fees in place prior to the pandemic, many others raised their charges during COVID. With fitting rooms unavailable, customers had to order multiple colors and sizes of clothing with the intention of returning what didn’t work. According to the National Retail Federation (NRF) and Appriss Retail, the rate of online returns increased to 16.5% in 2022, up from 9.6% in 2019.
Return policy fees have become increasingly common in the retail industry. Happy Returns reports that 81% of retailers introduced return policy fees in 2022, which can take various forms, including restocking fees, return packaging charges, and even home pickup fees.
Customers are also wary of these tighter return policies. Blue Yonder found that 59% of customers believe these policies deter them from making a purchase. This hesitation can lead to reduced sales, impacting a company’s profitability.
It’s crucial to note that return fees often don’t cover all the costs associated with returns. Hidden expenses can still eat into a significant portion of a company’s profit margin, highlighting the need for alternative solutions beyond merely charging customers for returns.
The return fee challenge is a complex issue that affects both businesses and customers. While companies aim to reduce losses and streamline the return process, they risk alienating customers and deterring potential purchases. As the retail industry continues to evolve, finding innovative solutions that strike a balance between customer satisfaction and profitability will be essential for long-term success.
Yours truly,
The Instant Refund Expert™
Follow me on X and IG @refundsblog
More: https://www.wsj.com/articles/those-new-online-returns-fees-are-driving-away-shoppers-2d3aa5fb
The Refunds Blog 