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Retailers are implementing stricter return policies ahead of the holidays

by SuperiorInvest

The Christmas shopping season is always closely followed by a spike in gift returns.

But this year it may be harder to return items for free or at low cost.

Roughly 60% of retailers said they are making changes to existing return policies, with fewer promising free returns, according to a recent survey of retail executives.

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Retailers expect an average of about 18%, or $158 billion, of merchandise sold during the holiday shopping season, according to the latest data from the National Retail Federation.

For 2021 overall, the return was about 16.6% of total US retail sales, or $761 billion in returned goodsand in 2022, fewer businesses will be able to afford such a high price.

With rising costs squeezing margins, many retailers are rethinking their return policies, shortening return times and even charging a fee for returns or restocking, according to Spencer Kieboom, founder and CEO of Spencer Kieboom. Pollen Returns, a returns management company.

Expect shorter return times, restocking fees

A delivery man holds Amazon.com packages as he prepares a vehicle for delivery to the United States Postal Service’s processing and distribution center in Washington, DC

Andrew Harrer | Bloomberg | Getty Images

Stores like Gap, Old Navy, Banana Republic and J. Crew (which was once well known for its generous return policy throughout the life of the garment) have shortened their regular return periods to one month. However, end-of-the-year shoppers are getting some reprieve: J. Crew and others are currently offering extended holiday returns and exchanges.

Anthropologie, REI, and LL Bean (which also once promised lifetime returns) now charge a fee for mail-in returns — all around $6.

“These adjustments to the return policy are not to cover costs,” Kieboom said. “They’re really there to discourage consumers from coming back.”

Rising costs are squeezing margins

With the explosion of online shopping during the pandemic, “free returns were a highly convenient model that the customer appreciated,” said Erin Halka, senior director of supply chain management firm Blue Yonder. Now, with higher labor and shipping costs, it’s costing retailers “a huge amount of money,” she said.

“Return fees are one way to cover some of those costs,” she said. “It can also discourage customers from over-purchasing, as at least 10% of returned goods cannot be sold.”

As retailers struggle with excess inventory, “returns often don’t end up back on the shelf,” and that creates a problem for retailers trying to streamline spending and improve sustainability, Kieboom said.

The supply chain is designed to go in one direction.

Lauren Beitelspacher

associate professor at Babson College

“The supply chain is designed to go in one direction,” said Lauren Beitelspacher, associate professor and chair of the marketing department at Babson College.

“The more money retailers lose in revenue, the more they will have to make up for it by raising prices,” Beitelspacher said.

“Changing the return policy is an easier pill for the customer to swallow than increasing the purchase price.”

How to avoid return fees

Still, shoppers love free returns almost as much as free shipping. In fact, 98% of consumers said free shipping is the most important factor when shopping online, followed by more than three-quarters who said the same about free returns, according to a recent report from PowerReviews. Affluent shoppers favored the free returns policy even more.

If returns are important, check the policy before you buy, experts say. It is often not immediately clear, said Halka. “Usually you have to dig into the fine print.

Expect restrictions on what can be sent back and when, she said. “The typical window now is 30 days.”

This time is well spent when it comes to making the best possible purchase decision. “You have to find the return policy that works best for you,” Kieboom said.

For those who want to avoid returns altogether, shopping in person may be the way to go, Beitelspacher suggested. “Most returns come from regret because it’s not what we expected. Shopping in person minimizes the gap between expectation and reality,” she said.

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