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Consumers could end up paying the price.
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It’s common for retailers — both online and brick and mortar — to offer customers the option to return purchases for free. And in the case of the former, retailers will often bear the cost of processing and shipping items back to their warehouses and distribution centers.
Meanwhile, data from Salesforce shows that returns for the 2022 holiday season are expected to rise 57% from the 2021 season after all is said and done. Salesforce also anticipates that consumers will return over $1.4 billion in holiday orders from this past season.
That’s apt to cost retailers a lot of money. And it could come back to haunt consumers in the coming year.
When free returns aren’t really free
Returning merchandise to stores is an age-old practice. And there’s an expense involved in restocking items that are returned in person. But where retailers really tend to take a hit is online returns, because they have to absorb the cost of having items shipped back to their facilities.
Some items that are returned to retailers can be resold to other customers, but that’s not always the case. And often, retailers have to eat the cost of returns and make up for it in other ways. For the most part, that means charging more money to compensate.
Given the notable uptick in returns for the 2022 holiday season, it wouldn’t be surprising to see the cost of certain goods increase in 2023 as retailers attempt to recoup some of their losses. But higher prices in stores could really hurt consumers at a time when inflation is still raging.
We’re starting off 2023 with inflation at an elevated level. Thankfully, the rate of inflation has cooled somewhat since peaking in mid-2022. But consumers are still looking at spending more this year on things like food, housing, and utility bills. And so they really can’t afford a higher credit card tab at retailers.
No great solutions
A big reason consumers tend to return so many goods is that there’s no penalty for doing so. But if retailers continue to take a major financial hit by offering free returns, especially in the context of online orders, they might pull back on that practice. If that were to happen, it would likely change the way a lot of people shop.
Many people shop online because it’s easy, convenient, and risk-free. But charging customers for returns adds a level of liability into the mix. And that’s not something consumers want. Unfortunately, though, they may not get a choice if the high cost of returns forces retailers to adopt new policies that help them stay afloat.
In fact, some retailers already charge a restocking fee for returned online orders. Much of the time, that fee is modest. But consumers could see restocking fees increase as online returns pick up.
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