(NewsNation) — Consumers are spending a record amount online, but tighter return policies are reportedly causing some to rethink where they shop.
The rise of online shopping has led to a surge in returns. Major retail chains like Saks Fifth Avenue, Abercrombie & Fitch and Zara have responded with stricter policies, adding return fees and shortening return windows, The Wall Street Journal reported this week.
Priya Rednam-Waldo, a 40-year-old therapist in Detroit, told The Wall Street Journal she stopped shopping online at Saks Fifth Avenue after the chain added restrictions. In April, Saks began charging $9.95 for returns by mail.
“If I can find the time to go to a store, I’ll do that,” Rednam-Waldo said. “But I won’t gamble anymore with online purchases because of the fees.”
A recent survey by Blue Yonder, a supply chain management company, found that tighter return policies are starting to put off consumers. Of those who were aware of stricter return policies, 69% said the rules deterred them from making purchases — up from 59% who said the same in 2023.
But it’s not just a few stores cracking down. Blue Yonder’s 2024 report found that 89% of retailers have taken action to restrict return windows, increase fees or restrict return eligibility in the last 12 months.
The stricter policies are in response to higher return rates, which have increased with online sales and come at a steep cost to retailers.
The average return rate for online transactions is 15%, three times higher than the 5% rate for in-store purchases, according to the International Council of Shopping Centers. Consulting firm McKinsey estimates retailers typically pay between $21 to $46 per returned item.
Last year, customers returned $743 billion worth of merchandise, 14.5% of total sales, according to the National Retail Federation (NRF). In 2020, the return rate was 10.6% of total sales.
Return fraud is also on the rise. In 2023, nearly 14% of all retail returns were fraudulent, roughly $100 billion worth of merchandise, according to the NRF. A year earlier, abuse and fraud impacted 10.4% of all returns.
Now, stores are trying to strike a balance by weighing the cost of returns against customer satisfaction.
In some cases, retailers are telling shoppers to keep their unwanted merch. A 2023 survey on holiday shopping trends by ReturnPro found that nearly 60% of retailers have keep-it policies for items that aren’t financially viable to ship back.
Others, like H&M Group, are turning to technology. The Swedish fashion retailer is reportedly investing in software that uses artificial intelligence to generate personalized shipping and return fees.
“The fewer items someone returns in a year to a particular brand, the lower the personalized fee,” The Wall Street Journal reported.
Recent shopping trends suggest the tug-of-war over returns isn’t going anywhere and may intensify as e-commerce continues to grow.
This year, U.S. shoppers spent a record $10.8 billion online on Black Friday, up more than 10% over last year, according to Adobe Analytics. That’s more than double what consumers spent in 2017.