Online Retailers Cutting Back on Free Returns

by M.C. Millman

With the percentage of returned merchandise more than doubling since 2019, 81% of retailers now charge customers a shipping fee to take back online purchases. 

Last year, customers returned nearly 17% of what they bought online, according to Happy Returns. Happy Returns conducts annual surveys to gain an understanding of evolving shopping habits, online returns preferences, and how merchants are responding to rising return rates, the amount was significantly lower in 2019 when only 8% of online purchases were returned. And returns are showing no signs of slowing down anytime soon, as 87% of merchants reported an increase in return rates this year.

The Wall Street Journal states that analysts estimate that merchants lose around 50% of their profit margin on returns when factoring the cost of processing the return of the item into the sale.

According to Happy Return's report, four out of five merchants now charge customers to ship back an item. Whereas, in the past, merchants considered returns to be a cost of doing business, those costs are growing by leaps and bounds at a time when retailers are desperately seeking ways to reduce costs. This has resulted in many merchants deciding to change their free return policies in a number of ways. 

Shortening the window for returns is one change merchants are applying. Others are charging for mail-in returns or restocking fees, while other retailers now require in-person returns through curbside pick-up areas or inside the store. 81% of merchants surveyed by Happy Returns stated that they have started charging for at least one return method in the last year to help reduce return rates.  

Zara, Macy's,  Dillards, DSW, Kohls, TJ Maxx, Urban Outfitters, Abercrombie & Fitch, J. Crew, J.C. Penney, and H&M have all added shipping fees for mail-in returns. Amazon has also started charging for returns in some drop-off locations like The UPS Store. 

Some businesses still offer free returns, though, including Nordstrom and Zappos, which still have a free return-by-mail policy in place.