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Roula Khalaf, editor-in-chief of the FT, selects her favorite stories in this weekly newsletter.
Once again, my vanity had gotten the better of me. It turned out that a pair of “slim fit” beige corduroys ordered from Target couldn’t be attached without the help of a mechanical winch.
The biggest surprise, however, came when I attempted to return the pants and quickly received a refund along with the following message: “Feel free to keep, recycle, or donate them!” If the item has been damaged, please dispose of it safely. Thanks for your help!”
Intrigued, I turned to Google and learned that this practice – dubbed “refunds without returns” by analysts – was used by some of America’s largest retailers, including Amazon and Walmart, as well as a host of smaller businesses .
The business logic behind this phenomenon is, at first glance, quite sound. Online returns are an increasingly thorny problem for U.S. retailers, who collectively lost $248 billion to the practice last year, according to a study by the National Retail Federation. Often, the cost of shipping and handling a return is almost as high, or even higher, than the cost of the item itself. Sometimes the product is damaged during transportation and cannot be resold. There is also an environmental cost, linked to transport and disposal.
But retailers – inundated with returns that have only risen since Covid precipitated an e-commerce boom – have remained silent on the plan. Target, for example, makes no mention of “refunds without returns” on its site.
The secrecy is intentional, says Sender Shamiss, chief executive of goTRG, which handles returns for some of America’s largest online retailers, as Amazon, BestBuy and others try to “figure out how to stop losing dollars processing feedback that was very important.” , very low price.”
But it’s selective. It turns out I’m one of those chosen by an increasingly sophisticated algorithm that weeds out repeat repeat customers and scammers who simply can’t accurately measure their waistlines. Behind this policy is “a formula based on whatever you’re buying and the projected net profit the retailer is going to make, or gross margin, on that particular customer,” says Shamiss. “If you are trusted, you will be able to keep your item almost 75% of the time. »
Talking about this tactic would only encourage fraudsters to order and submit returns in hopes of being allowed to keep the items, analysts believe.
But the program’s “soft launch” is indicative of a broader reluctance to tackle the broken economics of online retail, says Christian Piller, co-founder of logistics platform Pollen Returns. He sees a cultural malaise: American consumers “were trained, in part thanks to Amazon. . . [to] just buy what we want,” knowing it can be returned — and cites much lower return rates in countries like Japan, which has yields of 3 percent compared to 30 percent in the United States.
The desire to alleviate so-called “return anxiety” has led to a revolution in the way consumers perceive clothing. So-called “bracketing” – ordering one size up and one size down before returning ill-fitting items – and “wardrobe”, where an item is returned after brief use, have become commonplace. The annual retail value of goods returned to the United States is estimated to approach $1 trillion. Attempts to solve this problem – by charging for returns or requiring customers to return products to a physical store – risk alienating shoppers.
E-commerce consultants point to potential solutions like virtual fitting rooms, in which consumers are expected to try before they buy, and Google has deployed artificial intelligence to help refine that process. However, my experiments with such technology have not yielded realistic results.
Meanwhile, no-return refunds have become an increasingly tempting alternative for U.S. businesses. Last September, a goTRG survey of more than 500 U.S.-based retailers found that nearly 60% were using “keep it” refunds to reduce waste and costs.
My own experience of the project ended up illustrating its absurdity. As I was going to donate the chinos to my local Salvation Army branch, I passed a huge, half-empty Target. I would have been happy to drop them off there.