Shifting Online Sales Policies
They're not nearly as customer-friendly as they used to be.
The Atlantic’s Amanda Mull has discovered the same thing many of us have: “The Free-Returns Party Is Over.”
If you’ve recently tried to return something you bought online, getting your money back might have gone a little bit differently than in the past. Maybe you received a store credit when you thought you were due a full refund. Maybe the retailer encouraged you to return your ill-fitting dress to one of their stores or, for reasons that are not at all clear, to your local Staples. Maybe encouraged isn’t a strong enough word, because dropping your return in the mail instead would have cost you $7.50, even though it used to be free.
I do most of my online shopping through Amazon and have noticed a gradual change. It used to be that, if I wanted to return something, UPS would pick it up for free. Gradually, the policy shifted and that became the case only for certain reasons supplied for the return. (I found that “Inaccurate website description” usually worked.) A few months ago, it became almost impossible to get free pickup, even if they sent the wrong item or the item arrived damaged. I either needed to drive the package to the nearest Kohl’s or pay a $7.50 pickup fee.
Apparently, it’s not just Amazon.
For regular people who return things here and there, these marginal policy changes can pose some perceptual challenges—is something changing, or did you just misremember your favorite stores’ rules? In all likelihood, it’s the former: Quietly, and largely unnoticed by many buyers, the returns landscape is shifting. All kinds of retailers have begun to tweak their policies: Kohl’s, the suburban mecca of affordably priced clothes and housewares, now charges for return shipping, as does REI, the yuppie mecca of camping and hiking gear. Neiman Marcus won’t charge you for shipping as long as the product is back in their hands within 15 days of when you received it, but after that, you’re out $10. Even Amazon has made some tiny adjustments in its famously returns-friendly policies, charging customers $1 for dropping off packages at a UPS store if they forgo drop-off at a Whole Foods or Amazon Fresh location closer to them.
In a 2022 analysis of 200 retailers’ return policies, the post-purchase-logistics company Narvar found that 41 percent charge some kind of return-shipping fee—up from 33 percent in 2021. Amit Sharma, Narvar’s CEO, told me that that number is still rising; now it’s more like 44 percent. And charging for returns is just one example of what he said are many trendy policy changes. The last time you tried to return something, maybe you didn’t succeed at all, because the fine print revealed that your deeply discounted, deeply uncomfortable shoes had been banished to the realm of the final sale.
It’s no mystery why stores want to make this change:
Returns are the intractable problem of online shopping. For nearly two decades, the expectation has been that customers can return anything that doesn’t spark joy, sometimes months after they bought it, no real reason required. This approach has been wildly successful for retailers, at least insofar as it has persuaded millions of people to buy clothing, shoes, furniture, and other fit- and taste-sensitive goods online. But it has also been a giant boondoggle, logistically and financially. Most kinds of brick-and-mortar stores have a return rate in the single digits, but for online purchases, the average is from 15 to 30 percent; for goods where the physical, tactile experience really matters, as much as half of sales might come back.
But it’s always been an expensive prospect that was chalked up as a cost of doing business. So, why now?
Internet retailers have been saber-rattling about the need to tighten up anything-goes return policies for years. Now they’ve found their chance. When everyone’s already hooked on online shopping, why let us return things for free?
The balance of power simply shifted. Amazon no longer gives a damn about my business because they’re pretty sure I’m coming back. And, ultimately, my wife or I will drop stuff off at the Kohl’s a couple times a month because it’s still remarkably more convenient to order from Amazon than it is to go to the store or postpone purchases.
Laissez-faire return policies became the norm because internet retailers wanted to shift the balance of power in the industry in their favor. Since the advent of online shopping, those retailers have bent over backwards to please consumers, sometimes at extraordinary cost to their own budget. At least initially, what they were selling was broadly unpopular. Americans once had a real aversion to buying most things online. Internet retailers had to convince millions of Americans that shopping in person, which by the 1990s many considered a social activity or a favorite pastime, was actually a hassle. They also had to overcome the distrust that many people felt toward what was then a novel technology. Buying something online sounded like a great way to get your credit card stolen.
To turn the tide of public opinion, online stores went about the work of highlighting their putative advantages—huge selections, low prices, no fight for parking on a busy Saturday—and eliminating as many perceived risks as possible. A major part of that effort was getting rid of fees: You wouldn’t be dinged a couple of bucks for the convenience of avoiding the mall, and you wouldn’t be dinged a few more if you decided you didn’t like your new stuff. For consumers, this was a gift of corporate-subsidized ease. According to one estimate, a single return can cost a retailer $10 to $20 before the price of transporting it back to the warehouse is even factored in. Nevertheless, absorbing this cost allowed for online financial transactions to mirror those available in physical stores, and companies that pioneered these policies, such as Amazon and Zappos, gobbled up sales from brick-and-mortar competitors, even if they lost money doing so.
This entrepreneurial bargain is at the foundation of many tech businesses launched in the past three decades: Losing money up front is fine if you’re using it to buy market share. For upstart retailers that could make the math work long enough, the gambit paid off—they scaled up, and their brick-and-mortar competitors have now mostly adopted their tactics online, sunk into irrelevance, or closed entirely. (RIP Bed Bath & Beyond.) Even the industry’s winners, however, eventually have had to control the bleed. They’ve tended to try to account for returns losses by cutting costs elsewhere: increasing automation, using cheaper materials, cutting wages and benefits.
Abandoning generous return policies themselves was long seen as untenable, according to Neil Saunders, the managing director of retail at the consulting firm GlobalData. “There was a reluctance, because it was like, Well, if we do this, and no one else does, it puts us at a disadvantage,” he told me. Smaller retailers were scared of losing sales to bigger retailers that were better able to absorb the cost of lax policies, especially Amazon. But then came the coronavirus pandemic. Return rates skyrocketed as supply shortages rippled through the consumer market and people began buying more kinds of things online and trying out unfamiliar retailers. Those return rates still haven’t gone back to their pre-pandemic levels, Saunders told me. He believes the scales have already tipped in favor of reeling them in with blunt action.
Convenience is always expensive for someone. For much of the internet era, the individual buyer hasn’t been footing the bill, but slowly, that has begun to change. Now if you don’t want to bear the brunt of convenience fees, you might be paying in legwork. For all the promise of online shopping, you could very well end up in a crowded parking lot on a Saturday with your return in hand anyway.
Part of this is a natural sorting. The online shopping era is now more than a quarter-century old. I do most of my shopping online at this point and have for years. Part of it is that consolidation has done what it always has: given firms monopsony power.