Free online returns cost retailers millions. Now they want you to pay for it

Cost of Living4:56No more free returns?

Julia Harrison has a daily routine: work, walk her dogs and check several online stores for her next big clothing purchase.

“Aritzia is my number one, followed closely by Nordstrom, The Bay … Zara, H&M. That’s kind of the main lineup,” the Victoria, BC, resident told CBC Radio’s Cost of Living.

Harrison began shopping online during the COVID-19 pandemic, when in-person shopping wasn’t an option. Now it’s become something of an obsession — fueled in part by the fact she can return most items for a full refund.

But these free online returns, once used to lure customers like Harrison from brick and mortar stores, have become so costly that many retailers are now looking for ways to break shoppers of the habit.

“It’s a vicious cycle of purchasing everything in my cart, returning three quarters of it, purchasing everything again. Like, it’s just never ending,” said Harrison.

“My check-out this morning was like, $1,300. But I’m like, ‘Oh, I’ll get that back.’ “

Surcharges help recoup cost of returns

Harrison has to drop off her returns at the local post office in Victoria. Although it doesn’t cost her anything to do that, returns do cost retailers, sometimes in the millions of dollars.

According to a US-based study by Pitney Bowes earlier this year, returns cost retailers up to 21 percent of the item’s original value, when shipping, processing and restocking are taken into account.

More retailers have begun adding surcharges to online returns to help recoup some of the costs, pushing back against the free-returns policy that has become an industry standard in recent years.

Still others are finding more innovative solutions to help deal with the costs and reduce the environmental impact of shipping returns back to a warehouse.

A man sits on a bench in front of a clothing store with fashion mannequins in the window.
A man sits in front of a Zara clothing store in Nantes, France, in March 2021. Zara announced earlier this year it would add a surcharge to online returns in the UK, ending its previous policy of free returns for online purchases. (Loic Venance/AFP/Getty Images)

Fashion retailers turning the tide

Return policies differ across brands and industries. But the tide seems to be shifting fastest in the fashion industry, which is arguably where the free returns trend first became so prolific.

In the UK, fashion brand Zara recently introduced a £1.95 charge (about $3 Cdn) for online returns, joining other brands like Uniqlo and Next.

“Customers can return online purchases at any Zara store in the UK free of charge, which is what most customers do,” a representative told the BBC. Returns for online Zara orders in Canada are still currently free.

In Canada, online returns will cost you $7 at Abercrombie & Fitch and $9.90 at Uniqlo, which also doesn’t allow online purchases to be returned in-store.

The surcharge for returns is a major influence on where Harrison decides to shop.

“I’m editing my cart, waiting a couple days to make sure that what I want is actually what I want, [and] looking up reviews,” Harrison said, noting that in general, she’s more conscious of her online shopping habits when she knows she won’t be able to recoup the entire amount if she returns an item.

According to a 2017 survey by Canada Post, a majority of respondents share Harrison’s opinions. The survey found that 57 percent of online shoppers won’t buy items from a retailer that doesn’t offer free returns by mail or courier.

However, 40 percent of respondents said they would be willing to pay for returns if they split the shipping cost with the retailer.

A man with brown hair and scruffy facial hair smiles.
Retail expert David Ian Gray says the free returns policy once used to promote online shopping has become an industry standard — a costly one for many retailers. (Chung Chow)

Consumer expectation became industry standard

David Ian Gray, a retail marketing expert and founder of the Vancouver-based retail advisory DIG360, said free returns were originally intended to make online shopping more attractive to people more used to buying in-store.

They became particularly important in the fashion industry. After all, clothing never quite looks, feels or fits exactly like the image on a website suggests it will.

“The crux of it is, consumers are pretty good gamers,” Gray said. People figured out that instead of trying on several sizes in a fitting room, they could buy multiple sizes, keep the one that fit and return the ones that didn’t for a refund.

Over time, free returns grew into a consumer expectation and an industry standard — one that carries heavy costs for retailers.

“Even getting back to a warehouse here in Canada, and then unpacking it in the warehouse, [then] finding a place to store it where it can be retrieved — all that handling is labor-intensive,” said Gray.

While charges for online returns are becoming more common, he said retailers are considering other measures, too.

A Canada Post worker carries packages while making deliveries in Vancouver on Dec. 24, 2020. A 2017 Canada Post survey revealed that 40 percent of respondents would be willing to pay for returns if they split the shipping cost with the retailer. (Darryl Dyck/The Canadian Press)

One option is simply increasing prices to make up for projected return expenses. Another is introducing membership tiers with free returns included as a higher-tier perk.

Some brands have personalized their online stores to provide as much information on fit, color and other features to ensure shoppers don’t need to buy several versions.

High-end Canadian shoe brand Fluevog, for example, includes several explanations about the fit of its products and offers live chats with representatives to lead shoppers through the buying process much like speaking to a clerk in a physical location.

“They’re trying to slow down people’s experience on the site so that when they do check out the item, that they’ve done fairly good due diligence, that that is exactly what they want,” said Gray.

WATCH | The high environmental cost of free online returns:

Why free online returns are terrible for the environment

Between 30 and 40 percent of all online purchases are sent back. You may not realize it, but those returns are actually costing the environment, one expert says.

Returning it forward

Anthony Kentris, co-founder of the clothing company Good for Sunday, offers a unique solution called EcoDrop: if a customer buys an item they no longer want, they can get a full refund by shipping it directly to the next customer.

Kentris says the solution uses less fuel and reuses the item’s original packaging — which is made of recycled and recyclable material. It also saves Good for Sunday money.

“It’s very expensive for a small business like us to keep up with the standards of free returns that larger companies have set.”

Amazon, the largest online retailer in the world, has long allowed free returns, something experts say has repercussions for the environment and business.

A woman leans on a man's shoulder in a studio portrait.
Demetra and Anthony Kentris, co-founders of Canadian fashion brand Good for Sunday, offer free refunds with their EcoDrop program, which allows customers to ship returned goods directly to the next buyer. (Paul Bolasco)

Shipping an item from a customer in Ontario to Good for Sunday’s headquarters in Toronto costs $12, Kentris says. To ship from BC, it jumps to $25 or more. That cost was especially high during last year’s floods on the West Coast.

“If we have our margins on our business and we’re paying out of pocket $25, there goes almost all of our profits,” he said.

To make EcoDrop a more attractive option, Good for Sunday charges $12 for a traditional return. Kentris says that in the few months since it was introduced, about half of their customers are choosing EcoDrop.

Good for Sunday’s website advertises that its products are made of eco-friendly materials and made with ethical labor, so for Kentris, it’s also about doing its part to offset environmental costs.

“When you return an item, a lot of the time that just ends up in a landfill. So if brands were to adopt this, that would help eliminate all that waste,” he said.

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