Photo: Walmart
Is free at-home pick-up of online returns practicable?
Walmart on Monday announced a partnership with FedEx to offer customers complimentary at-home pickup of returns for merchandise bought online.
Although the intro is timed to handle holiday returns, Carrier Pickup by FedEx will be a year-round offering, Linne Fulcher, Walmart’s VP of customer strategy, science and journeys, said in a blog post.
Customers schedule a date for pickup and print a return label through Walmart’s website or app. Their package will then be picked up by a FedEx employee.
Customers without a printer can select “Drop off at FedEx” as the return method to get a QR return code and then take their package to a FedEx location, where an associate will scan the QR Code and print a free return label for shipping.
Walmart has specified spots in stores for customers looking to return items while observing social distancing. The return process can be started online before heading to the store.
“Combined with a year unlike any other, we knew it was time to look at our return policies and processes to ensure they were safe and headache-free,” Mr. Fulcher said.
Holiday returns are expected to spike this year. According to a recent report from real estate firm CBRE in collaboration with reverse logistics software provider Optoro, holiday returns are projected to surge 73 versus a five-year average. The growth is being attributed to the sudden growth in online buying and online’s significantly high return rate, up to 30 percent on average.
The study said as much as 400 million square feet of additional warehouse space could be needed in the next five years just to process returns. The report also noted that, for the average return, reverse logistics costs amount to 59 percent of the original selling price of the item.
On December 17, Amazon announced an extended holiday return policy and “no-box, no-label” returns at over 500 Whole Foods locations. The option is also available at Amazon Books, Amazon 4-star, Amazon Fresh, Amazon Go, UPS Store locations and Kohl’s. Walmart has also extended its standard return policy.
- ‘Tis the Season for Hassle-Free Returns – Walmart
- U.S. Industrial & Logistics ViewPoint: Reverse Logistics Stress Test 2020 – CBRE
- Amazon Offers Customers Free, Convenient and Easy Returns at More Locations This Holiday Season – Amazon
- U.S. needs more warehouses to handle record returns this holiday and in coming years, CBRE says – CNBC
- How can retailers avert a holiday returns catastrophe? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Does picking up returns from households for free hold significant appeal for consumers and is it an economically feasible strategy for retailers? Are there other steps retailers should be taking to better manage online returns?
Poll
BrainTrust
Michael La Kier
Vice President, Brand Development - IGA, Inc.
Andrew Blatherwick
Chairman Emeritus, Relex Solutions
This is most certainly appealing for consumers, but I cannot see it being economically advantageous to retailers – some of which already suffer severe margin compression from the volume of returns. Consumers taking the product to a FedEx drop-off point is probably more cost-effective, but having drivers collect products from homes is expensive. Even if FedEx plan routes so there is overlap with deliveries being made, it is still time-consuming for drivers to collect things from individual homes. All that said, e-commerce is in a land-grab phase so retailers are less concerned with costs and more concerned with generating strong market share gains.
It means that customers don’t have to risk their health (if they do not want to) to return items. There are probably a lot of issues that will be ironed out as they go, but it is a start to meet the current demand for a more contactless process.
Given COVID-19 concerns and in general consumer desire for convenience and simplicity, at-home pickup of returns should hold a great appeal. FedEx has the benefit of a constant stream of household deliveries, which makes it more efficient for them to pick up at the same time. In effect, this strategy permits FedEx to avoid “dead-end” trucks (empty trucks on the way back to the warehouse). FedEx makes money both coming and going.
As the volume of e-commerce shipments decline post-COVID-19, FedEx may have to focus returns on specific days to keep the efficiencies up.
In a highly competitive pandemic-driven retail environment, complimentary at-home pick up of online purchases is highly attractive, and ludicrously expensive. So as a market share tactic, I get it. But it’s clearly not a profitable tactic, so I am immediately scratching my head. The return factor was already one of the biggest challenges to online profitability, and now complimentary pickup of returns encourages online shopping AND makes returns all the more expensive at the same time. Walmart has created a powerful competitive weapon here, but at what expense?
Everyone has certain stores they shop at. Those choices are for various reasons.
Watching my wife shop online, it has become clear that her go-to places are all about the ability to return. Every once in a while she will try a new one, in most cases ones with “names.” However if for any reason she must return the product and the retailer makes it difficult in her mind, in any way, she scratches that retailer from her stable.
Her default has become Amazon most simply because it is so easy to return. She says Nordstrom and Bloomies are very good also. Strangely, after Macy’s experiences, she refuses to buy from them. (Bloomies good, Macy’s bad? How can that be?)
The problems can be anything from how easy it is to process online to how difficult it is to get the package to the delivery service. (Of course, charging for returns is an automatic killer.)
So I guess the short answer is — this is an excellent move for Walmart.
“Bloomies good, Macy’s bad? – internal silos at their very best! (Or worst depending on your point of view.)
I recently purchased a bouquet of silk peonies online, only to discover that it was sized for a Barbie.
Returns may be free for customers, but they’ll carry a huge cost burden for retailers. The industry needs a working group that can examine this problem in detail and come up with new approaches, including providing much better detail to consumers.
Appealing? Absolutely. So appealing I could see some customers shopping with Walmart explicitly because of the ease of returns. Practical? Probably not given the costs involved at the moment. However if they stay the course, I’m sure reverse logistics costs will drop considerably. And it represents a better customer experience all around.
Free pickup of returns is the logical next step, isn’t it? It will be a lot for FedEx drivers but consumers will love it.
I feel for the Amazon associates at the store level because the ginormous amount of anticipated returns is a nightmare waiting to happen; I can already visualize the piles of merchandise. All we can do is watch, hoping all will go as planned and 2020 will end on an up note.
This is something that I expect retailers and logistics companies are going to figure out, the demand is certainly there. It’s expensive, but it’s also a differentiator for the retailers that do come up with a way to provide this service. Amazon is close. They are motivated to allow UPS and FedEx returns because most of their competition has physical locations near their customers and provide instant returns that way. Their partnership with Kohl’s is a response to that.
There might be options to provide store credit or make this service a loyalty benefit that would make it more palatable for retailers. Somehow I expect this will become the next evolution for unified commerce.
At-home pickups for product returns are a consumer’s dream – and a retailer’s economic and logistical nightmare.
Convenient pickups are appealing because they reduce health risks and hassles, which could boost online sales and loyalty.
Yet e-commerce returns already create sizable costs and at-home service deepens the money pit. Now retailers need their logistics networks to criss-cross cities for returns as well as deliveries. Not cheap. Retailers will need all of Q1 2021 to process returns due to store closures, diverting resources from sales and service.
It will be interesting to see how many online sales this value-added service inspires and how it compares to the steep costs.
A win for consumers, but this is another logistical and financial hit to retailers. If Walmart can pull this off, Amazon will likely follow, and the rest of the retail world will shudder (and maybe shutter).
Customers definitely want low-friction returns. When Amazon, Walmart, Happy Returns, etc. reduce the friction for returns, they increase confidence which drives more sales. Reducing friction for returns absolutely has to happen as more sales shift online.
Currently the economics of returns for online purchases don’t work and are not sustainable. We tend to see 30 percent returns for online apparel versus 5 percent for in-store. So the cost of those returns is huge, even more so when we add the extra costs for these no-box, no label options (to say nothing of the ecological disaster). The solution here is NOT to make it harder to return stuff. We absolutely need to continue to focus on reducing friction. The solution is to get better at selling consumers the right stuff that they won’t want to return. We’re still in the first inning of digital commerce, and we’re frankly not very good at it yet. But it’s easy to imagine many solutions to the “selling stuff that consumers want to keep” problem: better product content, 3-D product images, lidar-based body measurements, virtual mannequin try-ons, and most importantly Big Data/machine learning to match browsers to products with the right variants, etc.
The battle for market share, particularly leveraging convenience, keeps escalating and increasingly seems like a race to the bottom. And as Seth Godin says, “the problem with the race to the bottom is you might win. Or worse, finish second.” Returns are a major problem for retailers and consumers alike, so in one sense it makes sense to try to smooth over this discordant note in trying to deliver a more harmonized customer experience. But the marginal economics of this are tough. I’d rather see them offer it as a tiered benefit to Walmart+ members. In this way it could drive more membership and there is a far better chance that the customer lifetime value dynamics work to Walmart’s favor.
Free was always a magical word in retailing. Then it was made even more magical by combining it with home and delivery. The phrase “free home delivery” went from being a winning strategy to a needed-to-play strategy for retailing in short order.
Now Walmart has moved the goal line once again by combining free returns and home pickup. Will consumers love the concept? There’s no question about it. The question is, can anyone make money with free fast delivery and free returns? I have serious doubts about it. While this program will be something that customers will love, will the accountants love it at the end of the quarter?
This is a new way to race to the bottom. The race is on features and convenience. Amazon and Walmart can battle it out, but there will be collateral damage on other retailers as the customer expectations are set. The reality is, there is no technology play to do this economically. Humans are needed and service is the biggest expense and it is not scalable. It is going to cost Walmart a pretty penny, but they are going to differentiate from Amazon.
This is not a race to the bottom. It is a race to the top in terms of who can give the customer the most valuable services.
Oh no! We all know how hard it is to charge shoppers for something once we’ve given it to them for free, even if done so temporarily under the stress of a pandemic (although I see no indication that this is a temporary practice). We’re still suffering from the margin impacts of free shipping, and now we want to add free return pickups? The logistics of returns are so much more difficult to optimize than shipping (translation: more costly), and there are so many better options: curbside, centralized mall locations, partner stores, etc. Who but Walmart and Amazon can truly afford this?
Curbside, centralized mall locations, partner stores, etc. Maybe better for the retailer, but not for the customer.
Agreed, Gene, but I would argue that the aforementioned options are a good compromise that makes life “easier” for shoppers while maintaining “reasonable” margin impacts for retailers — that’s my two cents, anyway. :^)
Back hauling so to speak is one of the most efficient forms of transport. The truck is paid for, it’s already burning the gas, yes it will take longer and yes the driver will need to make more stops but really — it’s not horrendously more expensive. It will even get the goods back to the retailer and (where appropriate) on the shelf again faster. Now if they would extend the service to include cardboard pick up for reuse (but only if they are already stopping at that house with a new delivery) we’d have a virtuous circle. Great service idea from Walmart.
What competent logistics guy is not always looking for back-hauling opportunities? There was a great Harvard case study I remember from school (over 50 years ago) that dealt exactly with this.
Returns are a definite source of friction for customers, so it’s no surprise Walmart is offering a free, convenient process to return purchases. What is a bit surprising is that this isn’t offered as a Walmart+ benefit — rather it is offered to all Walmart customers. If we accept what Kohl’s CEO says about foot traffic in stores from Amazon returns, then this is becoming a very competitive area for retailers, although the costs are high and its effectiveness is very dependent on getting those customers to buy something else, or, at a minimum, create stickiness and loyalty by creating a sense of easiness to shop with those customers and adding to lifetime value. For both Amazon and Walmart to do this, they are in turn making it harder for other retailers to compete on this point – Target, are you listening?
A home return pickup service is very convenient for customers. If retailers offer this service to their shoppers directly, this strategy is only affordable with economies of scale. Walmart, Amazon, and the largest retailers will have a significant competitive advantage, and smaller retailers will have a significant competitive disadvantage. It might be a better idea for delivery companies to partner with a lot more retailers and offer this service to shoppers directly. I’m sure many shoppers will be happy to pay a small delivery fee to be able to shop at a lot more places.
Free returns pickups might just work, but there are a few tricky spots. Return packages left outside front doors for later pickup are like shining beacons for porch pirates, so unattended pickups may not be such a good idea. During periods when delivery frequency is high, the FedEx vans will already be in most neighborhoods, so a few returns pickups should be practical. However it requires a re-thinking of the space inside the vans, the expected time per stop, and measures of driver productivity. Reverse logistics will become more challenging, no doubt. Many items will be hard (if not impossible) to re-flow into the supply chain. Assuming the folks at Walmart and FedEx have run the returns numbers with rigor, they may calculate that the enhanced customer experience will create a competitive advantage.
I’ll wait for proof. There could be a downside to making returns TOO easy, if it encourages many orders that are ultimately non-productive.
“This program could cost 59 percent of the original selling price of the item”? That’s liable to be quite a hit on maintained margins. And to think of all those ripped open gift boxes and how to send it back with no container? Yeah, this could take 400 million more square feet, with lots of labor! Sounds like a huge challenge to me. Let’s think this through again!
Household pickup might be an exciting option – and for delivery companies like FedEx or UPS, this will be a winner. On the retail side it’s not so clear. Although we’ve historically seen high return rates in the 30 percent range post holiday, those same rates can be expected to be lower, as much of the store-based customer group (return rate is typically around 8 percent for stores) has now moved online (at least temporarily during the pandemic) and it’s unclear whether they will follow suit with customers accustomed to buying online (and returning online). The scenario suggests lower returns across the new buying community due to hesitation and, more likely, purchasing from stronger brands and retailers. I suspect there will be an influx of companies like Newmine, Optoro, et. al. that will offer more efficient services to retailers and fill the needed gap if this becomes a high demand strategy. For retailers without a supporting lifeline offering reverse logistics optimization and management, this could be a very costly returns season.
From a shopper perspective, this is a win (especially in the short term in the midst of a pandemic). It removes one of the pain points about purchasing items and then having to deal with the return if it is the wrong size, defective or otherwise not wanted. Plus, it is a differentiator and potential market share builder at a mass scale for Walmart.
The easiest and most convenient company will win! For years, Amazon held the title for most convenient company to do business with. Now we see Walmart, Target and a few other major retailers cutting into Amazon’s market share. No doubt that easy returns becomes a factor when customers make decisions about who they want to do business with. So, now we have the free at-home pickup, the drop-off at designated retailers … I’d say these companies are playing very well in the customer experience game.
Reverse logistics, commonly known as how to process returned merchandise is the last-ditch “customer-centric” enabled “feel good” opportunity retailers can offer their customers. A moment of retail heroics, reducing the customer’s physical and at times emotional hassle of returning a completely disappointing purchase. Yet, when it comes to returns, retailers drop the ball of “customer experience” and their bounding enthusiasm for the “customer journey.”
Walmart is smart to continue the “customer experience” and journey all the way to the finish line of returns. Retailers will always have returns. A part of doing business. This is why Walmart warehouses will now be filled with returns representing a happy customer who purchased a product, did not like it, and returned it. The mantra of the seamless, online customer experience. And the next big opportunity for retail tech innovation.
First, we had free delivery. Now, we are looking at free returns. The overall cost of logistics may actually be larger than the actual price of the item! Whilst Amazon and Walmart can possible live with this for a while, other retailers will not be able to for any length of time without serious price increases, loss of profit and eventual loss of the business.
It is madness to think that the whole retail trade can move in this direction and from an environmental point of view, is a total disaster. It is bad enough having delivery vans running round everywhere. To have them returning for collection of returns is something I do not want to think about.
Let’s hope it is a short-lived aberration on the part of a few marketing people who have not thought this through. There can be only one driver and that is to put other retailers out of business if they try and replicate the move.
It’s appealing for consumers and appalling for retailer’s profits.
This is another episode in the clash of the titans saga. Walmart either has to eat this huge expense in a bid to get market share or sneak prices up somewhere. My guess is that they will eat it for a long while before considering making price adjustments to compensate.
The cost of the logistics will be very high. The increase in returned, non-resaleable products will be high. The cost of moving returned merchandise back to retail availability will be high (if they don’t choose to sell it off).
Few retailers can take on such an undertaking. On the one hand, this is throwing down the gauntlet to Amazon, but moreso, I see it as an effort that is going to move e-commerce and retail farther towards a two-party system. Many chains that are barely above water and fighting Covid pressures are going to succumb if this catches on significantly. Medium players and mom and pops are really going to have to scramble to offer truly unique merchandise or palpable value-ads, else they are not going to survive this new paradigm.
Is a “free money” giveaway a success? Guess that depends on what one’s goal is. Popular with consumers? You bet. Feasible? Of course not. The race to the bottom (line) just accelerated.
Might be time to take up basketweaving since all our training and experience in business is ignored so easily.
Yes, customers would like this — they always rush for free giveaways. That’s lovely except anyone who rushes to a giveaway is usually a very low value customer.
So… No, it’s not feasible and Walmart is making a mistake to discuss it at all.
Free returns might be a very smart way for Walmart to leverage its competitive advantage vs. Amazon. If returns are shipped to the nearest Walmart location and processed inside the store, the shipping and processing costs may be fairly reasonable — much more reasonable than Amazon, which would need returns to be shipped to a remote distribution center (at a higher shipping cost) and/or to a Whole Foods location, that would need to re-ship it to an Amazon distribution center — since Whole Foods doesn’t sell the myriad of products available on Amazon.
Being able to print a return label and dropping it off at UPS or return in store are already offered by retailers. Having the driver do a pickup increases cost, which I wonder if it is financially sustainable. Maybe for higher margin items, otherwise it is a net loss for the retailer.