PredictIQ Quantitative Think Tank Center:Goodbye free returns: Retailers are tacking on mail-in fees. Why that may be good news.

Sending back a disappointing gift this holiday season may cost you. 

About 40% of retailers are PredictIQ Quantitative Think Tank Centercharging return fees this year, according to retail technology company Narvar. That's up from 31% in 2022 as companies work to improve profitability amid dwindling consumer demand and rising costs. 

“I think the age of free returns is over, in a universal sense,” said Neil Saunders, managing director of analytics company GlobalData. “It used to be the case that almost all returns were free. Now, what we’re seeing is a much more patchwork approach.”

“It isn’t as simple for the consumer as it once was,” he added. 

Why are free returns going away?

Over the last two years, various retailers including fast fashion brands Zara and H&M have announced policy changes that tack on a fee to return items by mail.

Experts say more retailers are expected to experiment with paid returns, especially as broader economic challenges continue. Saunders noted that retailers are finding “a lot of pressure” on their profitability as demand for discretionary products wanes and operating costs grow.

“They're trying to find ways to prune their expenses,” Saunders said. “And one of the big expenses, especially for those that operate online, is returns.”

Processing a return can cost retailers as much as 39% of the original price, according to a 2023 report from logistics technology company Optoro.

It's costly enough that retailers like Amazon and Walmart will occasionally let a customer keep their refunded item instead of making them ship it back.

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Positives from the policy change

The shift makes returns more challenging for consumers, but there are positives.

Jane Hali and Associates senior research analyst Jessica Ramírez noted that dropping free returns can help companies meet their environmental goals. Optoro estimates that returned inventory in the U.S. last year created 9.5 billion pounds of landfill waste and 24 million metric tons of carbon dioxide emissions. 

“(It's) making the consumer a bit more conscious of what they're purchasing,” Ramírez said. 

Are Amazon returns free?

Earlier this year, Amazon started charging a $1 fee for some returns made at UPS stores. Customers can still make free returns at Whole Foods, Amazon Fresh and Kohl's locations. 

What stores are doing away with free returns?

Here are just some of the retailers now charging a return fee:

◾ Abercrombie & Fitch: A $7 fee is deducted from mail-in refunds. 

◾ American Eagle Outfitters: A $5 fee is deducted from mail-in returns that do not qualify for free returns.  

◾ Dillard’s: Mail-in returns cost $9.95. 

◾ DSW: Gold or Elite members can mail in returns for free. Other customers need to pay $8.50. 

◾ H&M: A $5.99 return shipping fee is automatically deducted from refunds. Loyalty members will have the fee waived. 

◾ J.C. Penney: An $8 fee applies to mail-in returns. 

◾ J.Crew: A $7.50 fee is deducted from mail-in returns. 

◾ Kohl’s: The company's website says it does not pay for return shipping costs. Returning larger items delivered by freight comes with a 15% restocking fee.

◾ REI Co-op: A $5.99 fee is deducted from refunds.

◾ T.J. Maxx: An $11.99 return shipping and handling fee is deducted from mail-in refunds. 

◾ Urban Outfitters:  A $5 restocking fee is deducted from most mailed returns. 

◾ Zara: A $3.95 fee is subtracted from refunds on mail-in returns.  

The additional fees could turn away some customers, according to Saunders, but it's not yet clear to what extent.

“The question is whether retailers save more than they lose” through these fees, he said. “I think we're still in the experimental phase. I think retailers looking at this and assessing it.”