Image: Sarah Grillo/Axios
The era of free online returns is starting to show cracks.
Why it matters: The pandemic-driven online shopping bonus forced retailers to adopt lenient return policies that cost them dearly. Now consumers may have to learn to live without free returns.
Driving the news: Amazon, once the king of free returns, is testing fees for them.
- It’s not universal — not yet, anyway — but if you want to drop off an item you bought from Amazon at a UPS store, you may be charged a $1 fee.
Threat Level: Consumers should expect more retailers to forego free online returns because stores are losing out on these products, Lauren Beitelspacher, a Babson College professor and retail expert, tells Axios.
- According to the National Retail Federation, returns accounted for $816 billion in lost sales, or 17% of total sales, in 2022, up from 11% in 2020.
- “If you buy it online, it has to go back to the fulfillment center, back through the distribution center, back into inventory — and frankly, there’s very little chance it’ll be resold,” she says. “That’s not sustainable for retail,” said Beitelspacher.
Zoom in: It’s not just Amazon: other retailers have also started deducting online return fees from refunds for items sent back to stores, including JCPenney, Foot Locker and Dillard’s.
- Some, like Kohl’s, have stopped paying for return shipping.
Yes but: The temptation to maintain a free returns policy is strong because of its appeal as a marketing tool.
- Many stores still offer free returns for online purchases brought to a brick-and-mortar store.
- Amazon itself continues to offer free returns at Whole Foods Market and Amazon Fresh stores, Amazon Hub Locker+ locations, and Kohl’s stores across the country.
What you say: “We offer Amazon customers convenient, easy returns with one or more options for label-less, box-free returns at no cost,” said company spokesman Steve Kelly.
- Debrup Jana, a senior director and analyst at research and advisory firm Gartner, tells Axios that consumers are unlikely to change their “overall buying behavior” because Amazon’s fee is “modest.”
What we observe: Whether Amazon’s decision to charge fees for some items returned through UPS locations signals further changes in their relationship.
- Beitelspacher speculated that Amazon’s delivery truck fleet could start accepting returns directly from consumers, similar to how US Postal Service workers can accept mail with prepaid postage.
- “They could completely forego a partnership with UPS,” she says.
- Jana agreed that it is possible for Amazon to gradually reduce its reliance on UPS while building its own logistics network.
- UPS has deferred a request for comment from Amazon.
The bottom line: Retailers try to balance their desire to keep customers happy with the need to keep profits.