81% of retailers charge a fee to return items

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by Ariel Zilber

The days of shoppers sending away unwanted or inappropriate items for free are over, as the holiday gift-giving season gives way to the gift-return season.

More than four in five merchants now charge customers a fee to reship or return an item they don't want, according to a report from logistics company Happy Returns.

Amazon has begun charging customers a $1 fee to return items to a UPS store instead of using Whole Foods, Amazon Fresh Grocery Store, or Kohl's — since it owns those companies or has partnership deals with them.

Zara, Macy's, Abercrombie & Fitch and J. Crew, H&M, and others also charge shipping fees for mail-in returns. According to CNN.

Abercrombie charges customers a $7 fee to return items, while American Eagle Outfitters charges a $5 fee for mail-in returns that don't qualify for free returns.

Dillard's charges $9.95 to return items via mail while H&M forces customers to pay a $5.99 return shipping fee.

J.C. Penney's fee for mail-in returns is $8 while J.Crew charges $7.50.

The change was primarily driven by the increased cost of both the initial sale of the item as well as the expenses incurred by processing the return.

Last year, customers sent nearly 17% of the total merchandise they purchased — a total value of about $816 billion, according to the National Retail Federation.

The 17% figure was more than double the 8% in 2019.

The process of handling returns impacts retailers' bottom lines. According to retail services firm Inmar Intelligence, retailers spend $27 to handle a $100 product return purchased online.

Analysts estimate that companies lose about 50% of their profit margin on revenue when taking into account the cost of selling the product in addition to processing the return. According to the Wall Street Journal.

In years past, retailers were willing to absorb the cost believing that generous returns policies would keep customers coming back.

But the scope of the problem has expanded to the point that merchants are now forced to charge fees.

“We're headed toward a trillion-dollar problem here,” Tom Enright, a retail analyst at research firm Gartner, told The Journal.