Why Retailers Are Freezing Return Fees For The Holidays

Why Retailers Are Freezing Return Fees For The Holidays

Returns are inevitable – especially during the holidays and especially in ecommerce.

Last year, shoppers returned an estimated $761B+ in merchandise, per the National Retail Federation. Roughly $218B of those returns were online purchases. And the holidays saw the highest return rates.

In fact, roughly 18% of all merchandise sold during the 2022 holiday season will be returned, the NRF projects.

Meaning, retailers already seeing shrinking profit margins (thanks to rising costs) will see even smaller margins following holiday returns.

Why? Because returns jack up your operational expenses, subsequently slashing net profits. The more returns you process, the lower your profits.

To combat this, many retailers have started charging customers for online returns.

  • H&M automatically deducts $5.99 from all online returns
  • Zara charges $2.45 for returns to any drop-off point
  • J. Crew bills $7.50 for a pre-paid return label
  • Abercrombie & Fitch collects $7 to ship returns
  • Saks Off Fifth deducts $9.95 from the refunded amount

Return fees aim to offset the logistical expenses without turning off customers. But as David Sobie, VP of logistics company Happy Returns, points out: “[Shoppers have] become trained to expect returns that are free, convenient, easy, fast.”

So, these fees only work if other retailers in your sector also implement them. (And they tend to only work for bigger, more established brands.) Otherwise, customers will turn to competitors that don’t have a return fee.

But even in sectors where return fees are becoming more common (like clothing), brands find themselves softening these policies. For instance, Zara waives its return fee if the item is returned at a brick-and-mortar. Similarly, H&M waives this fee for customers participating in their loyalty program.

And many retailers are lifting these return fees for the holidays. Saks Off Fifth, for example, will allow free returns until January 31st on all orders placed between October 15th and December 25th. Orders placed outside that window are subject to Off Fifth’s normal return policy.

These return policy amendments, while potentially confusing, focus on customer retention. That’s because purchases made in Q4 are often gifts (and, as you know, more frequently returned).

But it’s not the gift giver who’ll pay for that return fee; the recipient will. And that $4-10 fee can quickly cost you 2 customers (the gift giver and recipient), which is a much bigger expense to endure than slightly higher logistics costs.