In some cases where the price and margin on items is very low, it makes sense for retailers to let customers keep items that they want to return for refund as it is more cost effective. Obviously, consumers can only learn about this policy at the point they are requesting a refund to avoid abuse. Another strategy that retailers should consider is to offer a 20 percent discount if the consumer would opt to keep the item they originally intended to return.

When I was in the party supply business, when we’d contact a vendor because we’d received an overshipment of something, the vendor would generally say “Just keep it.” That told us (as if we didn’t know) that the cost of shipping and handling was simply not equal to the margin on the product.

So it’s really a math problem. If it’s going to cost you more to process it than to write it off, sure, let the customer do what she wants with it. If not, take it back. And, of course, keep a database of “frequent returners” and let them know if they’ve gone over the line, and simply request they start returning products (ideally with a re-stocking fee).

It’s funny — words like “handling” and “re-stocking fees” generally feel like “well, we get to keep some of your money” but in fact, with DTC returns, they’re real things.

And as I’ve said before, especially in apparel, returns are simply a fact of life.

Noticed this on Saturday when I tried to return an item that arrived broken. Felt immediate relief to skip the hassle of repackaging the item, going to the post office and waiting in line while socially distancing. This practice improves the customer experience and can inspire more trust and loyalty, long-term benefits that outweigh returns costs.

To limit abuse, retailers can focus on consumers who request the most returns and require that they either prove a defect or send the item back.

This happened twice to me over the last two months. My first reaction, from a business POV was — SMART! Then I thought about how many consumers will catch on and simply request returns knowing they won’t be required to return.

Here is my suggestion. Have the customer go through the return process. But when they print out the label, the code will indicate for FedEx, UPS, USPS that the product should not actually be returned, but disposed of at the first opportunity.

I understand the logic of the math and of virus control — but the hole just keeps getting deeper.

If it’s cost-effective, yes. Depending on factors such as the cost of return shipping and product margins, or if the product is damaged and/or otherwise unable to be resold or returned to the vendor. It also pays dividends in keeping customers loyal and happy. As a customer, I have liked hearing that I can donate, discard, or keep an item that I don’t want and not have to deal with the hassle of returning it — especially in the pandemic.

A lot of online retailers have been doing this for a while. It looks like more retailers are doing this to reduce the return costs (and I am guessing returns have increased tenfold) and stay in keeping with with the contactless return policy most retailers have adopted.

Ahhh, returns — the red-headed step-child of a profitability matrix. Financially accounting for returns is a make or break strategy for increasing profitability. SMBs are just catching up to the return policies of the Amazons of the world and the goalpost keeps moving! Now, instead of just a lenient return policy, it’s get your money back and keep the item! I mean, this is a no-go for the smaller retailers – it’s too big of a financial burden. Using service providers like Newmine, Happyreturns and Returnly can keep retailers competitive.

The world of reverse logistics for consumer goods has been altered dramatically by the pandemic. Prior to COVID-19, there were mechanisms that easily enabled the return, recycling, redistribution, etc. of goods, often involving pretty efficient third parties. CDC and other requirements caused retailers to limit returns and that has impaired the system. We will ultimately go back to functioning reverse logistics networks but in the meantime it will be more efficient for the supply chain to have customers retain or dispose of products in several categories, including most food items.

I have had this experience and was glad to avoid the hassle of returning the item. Once I was told to donate it if it was still usable; that was great when the item was not what I ordered but usable. In other cases all I could do was throw it away because it was defective and not usable. Given the difference between the cost of the item and cost of the return processing, the policy makes sense and avoids hassle both for the company getting the return and the customer doing the returning. Companies can keep track of what items and which consumers are involved in the returns. If a customer appears to be abusing the policy, then they could be asked to ship the product back. If a company is getting a lot of returns, that product or company could be delisted.

When will we read about how “Keep It” elevates into “keep it and please shop elsewhere from now on”? “Free” deliveries and returns taught customers to buy first with comfort and then sometimes with reckless abandon. “Keep It” now puts a giant exclamation point on that habit. Sounds like the e-commerce equivalent of the ever deepening of the discounting by mall retailers. The math is totally understandable but the solution compounds the problem rather than solving it. Maybe like some other retail practices there will be rules and solutions that have to prevail during the pandemic and then revised practices that will work post vaccines.

This will work in most cases, but will require a close watch on those that try to abuse the policy. As online continues to grow, so will the ways in which retailers will need to deal with this challenge. Third party companies that handle returns will take on more of this process.

The proof of this concept is that Amazon has been doing this for years. From my personal experience, it seems they have a cut off in terms of the value of shipping cost being implemented three times vs. once, and if it doesn’t make the cost factor cut, they’ll just let you have it. This is another idea that is “shocking” to traditional retailers but I’d be willing to bet, since it’s been happening for years and now and is being copied, that the financials work out once you understand that shipping cost/profitability quotient is per product. Pretty brilliant IMO, and I doubt that you’d ever see traditional retailers try something like this were it not for Amazon.

E-commerce just keeps on giving, doesn’t it? Free shipping and free stuff! We lose a nickel on every order, but don’t worry, we’ll make it up in volume! Seriously, I get the math. But we’ve got to find a way to stop this relentless margin erosion. Maybe returns services are a better alternative here?

This makes sense from a customer service perspective and from an expense perspective. Good buyers negotiate allowances for returns (Not the same as accounting return allowance BTW) into their contracts so there’s really no incentive to go through the logistics hassle of returning the items on low retail, low margin products. And, as noted here, customers love it. So much easier.

In practice Amazon’s policy is even weirder than it seems. About two months ago I received an Amazon delivery not addressed to me and meant for a different address. Knowing somebody would be worried about the missing shipment I called Amazon to see if a driver could pick up the package and get it on its way to the right recipient. “Open it,” the customer service agent said. “If you want what’s in there keep it. If not just throw it out.” I called back, thinking I had encountered some disgruntled employee the first time around. I explained to the second customer service agent the mistake and described my first conversation. “That’s right,” she said. “Keep it if you want. Toss it if you don’t.” I hung up and delivered the package myself. Neither operator asked for a tracking number, or rightful recipient’s name. As far as they knew “the box” could have contained tea bags or a television. It didn’t matter to them. Does that make sense? Maybe if you are shipping hundreds of… Read more »

In some cases this makes sense. However there will be abusers of this customer-friendly policy. That is what concerns me.

Some retailers have agreements with their suppliers that they will take back returns. In a way, they are guaranteeing their merchandise. This has been challenging for some suppliers. In the end, they have a choice to do business with the retailer or not. Now we’re entering into the era of “returnless refunds.” After a point, retailers (and supplier/manufacturers) will be able to predict the cost of this program. They will build their pricing model around this. It’s the only way it can work.

Yes. It definitely makes sense. I believe Paula had it right – it is a math problem. The real problem is computing it however – in real time. The data has to be available at the time the customer is looking to return such products, determining return disposition based on product, aging, price discounting, location, estimated processing cost, etc. Additionally, there is a communication aspect to this as well and how retailers can let customers know. Lastly, retailers need to ensure shrink is limited and precautions are taken. It should be straightforward, but they need to make sure the customer is not milking the free refunding and keeping the product option. Repeated refund tracking or a processing fee deduction can reduce abuse.

The key here is having the analytics to ascertain the value of a return versus keeping the product. Such information can balance the cost of the return and the customer’s value. While larger retailers can invest in such systems, these tools may be beyond the investment necessary by smaller retailers.

Even without a pandemic, retailers need to address the issue of customers who are dissatisfied with a purchase. Assuming the dissatisfaction is legitimate, retailers need to recognize their responsibilities to make returns easy for customers. Customers already devoted time and money to purchase a product. They should not be burdened with additional effort to get what they already paid for.

Target has been quietly doing this since last April. I suspect many other retailers have as well, prior to this being “news.”

Why? To help train the algorithms and reduce fraud in the system with disingenuous purchases/returns. Once this is out in the ether as a “policy,” it could be gamed.

Well it is a dollars and cents decision for the most part. I’m still expecting to see Amazon Emporiums opening in many cities featuring an eclectic collection of returned goods selling at incredibly low prices as a good vehicle for dealing with the return issue.

Will this end up making the waste of online buying even higher? We’re already fighting plenty of environmental problems from online purchases.

Still, this is no surprise. Although we have finally seen reasonable writing around the difficult expenses of returns, it is an issue which has been ignored for far too long.

That said, if this policy becomes widespread, it’s also a way of spreading unwanted things across society. And that also can’t be good for us. What happens when the customer is told to keep that unwanted thing?

My father-in-law once was sent 2,000 shaker pegs when he had ordered 20. Some might think “great!” Let me assure you, it wasn’t. There was an obligation attached to figure how to get rid of them.

I’ve only had this happen once, and it was for apparel clearly sent from Asia. It was weird for me, but I figured they didn’t want the shipping expenses. Problem was that I still had to do something with an item that didn’t fit — and I would have preferred to have the right item. I’m environmentally conscious, so I got stuck on what’s worse–a wasted product or the impact of shipping a product overseas, when I would not have even bought it had I known it was sourced internationally. The outcome? Never ordering from them again.

Net-net, I get it, but it seems dysfunctional as a sweeping response–and I have to wonder when it becomes an “expected” cost of business, which certainly doesn’t bode well on the books. Not an easy one to solve, but I do agree AI can help determine the if/thens to streamline it sensibly.

I’ve had two experiences in recent months with items that arrived damaged. In both instances the ecommerce sellers looked at the photos I sent and shipped replacements free of charge without asking for returns. One of those was a $500 furniture item that weighed more than 100 lbs. They made good, but I was left with the problem of disposing of the unusable one!

I understand the money math behind both companies’ decisions, however, as described by Paula and other smart folks here.

A household with multiple holiday gifts that need exchanging, due to wrong sizes or other “normal” preferences, could show up as a bad actor if sellers are not intelligent about evaluating their behavior. Other folks may read today’s news as an invitation to game the system. Retailers will need to monitor this, of course. I’d bet they will.

My guess is while this seems smart, it leads to fraud. And one has to ask, “If the stuff you’re selling isn’t worth returning, why is it worth selling?” Essentially you’ve got a gift store for cheap merch now Amazon, Walmart and others. Part of the reason online suffers from 40-50% return rate is those purchases are not considered much. Click and buy. Smart retailers will understand the store is the hub profits come from — especially when returns are a historically low 6%.

It is all about the cost of shipping and disposal versus value of the goods. With modern analytics it is very easy to calculate the cost benefit of shipping return versus letting the customer keep the dissatisfied-with item. You can also attribute the return to the shopper and identify customers that are potentially abusing the returns program. Another way is to return a small but critical part of the product to reduce the shipping cost (like the key or a custom part) that will render the product inoperable.