Some stores now charge for returns
Not happy with the fit? Don’t like the color? A growing number of major retailers are charging fees to customers who send back unwanted merchandise.
For example, H&M revealed during its latest earnings call that it’s about to begin testing return fees in select markets. In June, Zara instituted a $3.95 fee on returns made via third-party drop-off locations (although not the company’s own stores). Anthropologie, Foot Locker, J.Crew and Urban Outfitters are other examples of retailers that charge return fees, which generally only apply to merchandise that is mailed back to the company. These fees typically amount to between $5 and $10 per return.
Why are stores adding return fees?
E-commerce continues to grow by leaps and bounds. It has expanded from 15 percent of global retail sales in 2019 to an estimated 22 percent this year, according to Morgan Stanley. While buying things online and having them delivered to your doorstep is very convenient for customers, it’s anything but for retailers.
Shipping has become increasingly expensive because of inflation. Higher gas prices, labor shortages and supply chain disruptions have weighed especially heavily on this part of the economy. It’s complicated and expensive enough to ship merchandise to a customer and even worse to have to take it back. Many large retailers are complaining about the associated costs: not just shipping fees, but also the staff time it takes to sort through all of these returns and the environmental impact of all of the extra packaging and fuel that’s used up along the way.
While some popular retailers such as Amazon have essentially conditioned customers to expect free returns, other companies are drawing a line in the sand. They seem especially affronted that a lot of returns are pre-planned. As in, some shoppers order multiple versions of the same item (perhaps in different colors or sizes), knowing they can return whatever they don’t want without a penalty. The companies that have introduced return fees are forcing customers to have more skin in the game.
High inflation and worries about slowing economic growth and a potential recession have made retailers especially cost-conscious. And in a departure from the past couple of years, many are now sitting on excess inventories. That’s partly because the supply chain is healing, but also because some items came in off-cycle and also because customer demand has been falling. Large companies such as Target and Walmart — neither of which charge for returns — are lamenting how excess inventories are costing them money. That’s evident in terms of the staff time spent managing the piles of excess stuff and also the discounts required to clear the backlog.
How to avoid return fees
Returning in-store is often the best way to avoid a return fee. Another good tip is to use ShopRunner. It partners with more than 100 retailers to provide free returns and free two-day shipping. Many credit cards include a complimentary ShopRunner membership (the service normally costs $79 per year). For instance, all World and World Elite Mastercard products are eligible for this free coverage. If you have an American Express or Chase credit card, there’s a good chance you qualify as well. PayPal offers free ShopRunner memberships to some of its customers, too.
The bottom line
Before you place your next online shopping order, take a close look at the retailer’s return policy, especially if there’s a good chance you’ll want to return something. With more companies charging for returns, it’s important to know what you’re getting into. Returning in-store or using ShopRunner (when available) are two good ways to avoid these fees.
Have a question about credit cards? E-mail me at ted.rossman@bankrate.com and I’d be happy to help.
