Retailers roll out stricter return policies ahead of the holidays

A spike in gift returns is always closely observed during the holiday season.

It may prove difficult to get things back this year for free or at a reduced cost.

According to a survey of retail executives, 60% of retailers indicated that they are making changes to their existing returns policies. However, fewer promises of free returns were made. 

Learn more about Personal Finance
Online store for Goodwill opens with a Picasso print
60% of Americans live paycheck to paycheck
Credit card balances jump 15%

According to the National Retail Federation’s latest data, retailers can expect 18% or $158 million of merchandise sold during holiday shopping seasons to be returned.

The return rate for 2021 was 16.6% of U.S. total retail sales or $761 billion in returns. In 2022, fewer businesses will be able afford such a high price tag.

According to Spencer Kieboom (founder and CEO of Retailer.com), retailers are reconsidering their return policies as rising costs squeeze margins. They may shorten the return window or charge a restocking fee. Pollen Returns, a return-management company. 

Gap, Old Navy and Banana Republic are just a few of the stores that carry J. Crew, once a well-known store for its generous return policy which lasted the life of a garment, has shortened its regular return window to one month. J. offers some relief for year-end shoppers. Crew and other companies are offering extended holiday exchanges and returns.

Anthropologie offers REI and L.L. Bean (which also once promised lifetime returns), there’s now a fee — all around $6 — for mailed returns.

Kieboom explained that “these adjustments in return policies don’t exist to cover costs.” “They’re there to discourage consumers from returning.” 

Blue Yonder senior director Erin Halka stated that “free returns” was a highly valued convenience model for customers during the pandemic. It is now more expensive for retailers to maintain, due to higher shipping and labor costs.

She said that charging for returns is one way to pay a portion of the cost. It can also deter customers overbuying since it prohibits the resale of at least 10% returned goods.   

Kieboom explained that retailers often struggle with excessive inventory. “Often returns don’t end up back on shelves,” which can cause a problem in retailers who are trying to cut costs and improve sustainability.

Lauren Beitelspacher (associate professor and chair, Babson College’s marketing department) stated that “the supply chain is designed for one direction.”

Beitelspacher stated that the more retailers lose on returns, the more they must make up by raising prices.

“Changing the return policy is easier for customers to swallow than increasing the purchase price.”

Free shipping is still a favorite of many shoppers. According to PowerReviews, 98% of online shoppers said free shipping was their most important consideration. More than three quarters said the same about returns. The preference for a free-return policy was even greater among the wealthy.

Experts recommend that you get to know the policies and whether the return option is available. Halka stated that it is often not obvious. “You usually have to look into the fine print.”

She stated that there will be limitations on what can and cannot be returned. “A 30-day window is typical”

It is worth the effort to make the best decision possible about your purchase. Kieboom explained, “You must find the best return policy.”

Beitelspacher suggested that shopping in person could be a way to avoid return hassles. “Most returns are due to regret over something that wasn’t what we expected.” She stated that shopping in person reduces this expectation-reality gap.

Subscribe to CNBC YouTube.