In Many Cases, It is Cheaper for Retailers to Let Consumers Keep the Product than Process the Return

It’s well known that return rates from ecommerce sales are much higher than brick and mortar retail - and represent a huge barrier to high levels of profitability in on-line channels.

Supply Chain Digest Says...   Naturally enough, with this type off policy, scammers who hope to benefit are showing up. The AI programs are designed to help find such grifters. What do you say? Click here to send us your comments   Click here to see reader feedback

Now, in a perfectly logical but yet in some ways a radical change in direction – telling some consumers to just keep product returns even after they get credited for them.

As reported this week in the Wall Street Journal, “For inexpensive items or large ones that would incur hefty shipping fees, it is often cheaper to refund the purchase price and let customers keep the products.”

The article says Amazon, Walmart, Target and other etailers have started to adopt such a strategy, in some cases using artificial intelligence to help in making the call.

Like much else, the new strategies are driven in part by the huge growth in on-line shopping seem since the start of the pandemic, which have been great for the top lines of many etailers – but also creating a growingly unmanageable level of return volumes.

The Journal found one customer who pleasantly surprised when she tried to return online purchases of makeup at Target and batteries from Walmart – and each company issued her a refund but told her to keep the items.

A Walmart spokeswoman told the paper that the “keep it” policy is designed for merchandise it doesn’t plan to resell and is determined by customers’ purchase history, the value of the products and the cost of processing the returns.

Etailer have been trying many tactics to re duce returns costs. For example, in 2019 Amazon announced on-line purchases could be returned at department store chain Kohl’s.

That might reduce returns costs for Amazon, as goods can be shipped in bulk back to its fulfillment centers rather than paying for individual shipments for all those customers. But even then, there is lots of handling costs both at Kohl’s and at Amazon, though Kohl’s may charge a discounted rate due to benefits on increased store traffic.

Returned goods are also often not sellable due to damage to the product packaging or other factors.

(See More Below)

The Journal found another shopper that attempted to return a $16.91 cat harness purchased from online pet retailer Chewy because it was too small. Chewy told her to donate the harness to an animal shelter, and still sent her a new harness in a bigger size.

Naturally enough, with this type off policy, scammers who hope to benefit are showing up. The AI programs are designed to help find such grifters, while stores do not offer the program even if they lose money on the return for goods that have an attractive resale value.

So you think this type of strategy is smart - and will it work? Let us know your thoughts at the Feedback section below.