To cope with rising return rates and shrinking costs, many retailers have opted to start charging for returns.
In 2023, the number of retailers charging for returns rose by 31% to 40% in the U.S. Our data shows that 53% of merchants charge for returns, while in the U.K., there is nearly an even split of free versus paid returns, with 48% of retailers charging for returns. In the fashion industry this number rises significantly, as 79% of fashion retailers are now charging for returns.
While the debate between free returns versus charging for returns goes on, retailers risk missing the bigger picture. Charging for returns doesn’t address the root causes of returns headaches: slow processing, high restocking costs and frustrated customers.
On its own, introducing returns charges (or otherwise tightening returns policies) is a temporary solution that addresses the symptoms of high returns costs without fixing the root cause. Most retailers are still stuck treating every return the same way, with partially digitized systems and unsophisticated processing. They’re leaving value on the table by failing to get returns back in stock quickly, or wasting mileage and time transporting all items to the same locations rather than directing them to the most appropriate place for best management.
The rise of paid returns
It’s easy to understand the reasoning for implementing returns fees when retailers face rising costs from processing, shipping and restocking returns — all while losing out on potential sales from inventory that cannot be resold. By implementing returns fees, retailers recover some of the cost of a return, and potentially discourage unnecessary purchases and expensive return-related behaviors such as ordering the same item in different sizes to try on. There is plenty of financial upside to introducing fees for retailers. However, paid returns might also turn away new customers and decrease the lifetime value of existing customers.
Offering free returns still works as a great incentive — perhaps even more so now it’s a rarer proposition. One study shows nearly 72% of U.S. consumers have a greater loyalty to retailers that provide free returns. In addition, 88% of consumers say they’ve stopped shopping with a retailer because the retailer introduced a paid returns policy, and over half (54%) actively avoid retailers that charge to return items.
