Free online returns cost retailers millions. Now they want you to pay for it

Cost of Living4:56No more free returns?

Julia Harrison has a daily routine: work, walk her dogsand check several online stores for hernext big clothing purchase.

"Aritzia is my number one, followed closely by Nordstrom, The Bay Zara, H&M. That's kind of the main lineup," the Victoria, B.C., resident told CBC Radio's Cost of Living.

Harrison began shopping online during the COVID-19 pandemic, when in-person shopping wasn't an option. Now it's become something of an obsession fuelled in part by the fact she can return most items for a full refund.

But these free online returns, once used to lure customers like Harrison from bricks and mortar stores, have become so costlythat many retailers are now looking for ways to break shoppers of the habit.

"It's a vicious cycle of purchasing everything in my cart, returning three quarters of it, purchasing everything again. Like, it's just never ending,"said Harrison.

"My check-out this morning was like, $1,300. But I'm like, 'Oh, I'll get that back.' "

Surcharges helprecoupcost of returns

Harrison has to drop off her returns at the local post office in Victoria. Though it doesn't cost her anything to do that,returns do cost retailers, sometimes in the millions of dollars.

According to a U.S.-based studyby Pitney Bowesearlier this year, returns cost retailers up to 21 per cent of the item's original value, when shipping, processing and restocking are taken into account.

More retailers have begun adding surcharges to online returns to help recoup some of the costs, pushing back against the free-returns policy that has become an industry standard in recent years.

Still others are finding more innovative solutions to help deal with the costs andreducethe environmental impact of shipping returns back to a warehouse.

Fashion retailers turning the tide

Returnpolicies differ across brands and industries. But the tide seems to be shifting fastest in the fashion industry, which is arguably where the free returns trend first became soprolific.

In the U.K., fashion brand Zara recently introduced a 1.95charge (about $3 Cdn) for online returns, joining other brands like Uniqlo and Next.

"Customers can return online purchases at any Zara store in the U.K. free of charge, which is what most customers do," a representativetold BBC. Returns for online Zara orders in Canada are still currently free.

In Canada, online returns will cost you $7 at Abercrombie & Fitch and $9.90 at Uniqlo, which also doesn't allowonline purchases to be returnedin-store.

The surcharge for returns is a major influence on whereHarrison decides to shop.

"I'm editing my cart, waiting a couple days to make sure that what I want is actually what I want, [and] looking up reviews," Harrison said, noting that in general, she'smore consciousof her online shopping habits when she knows she won't be able to recoup the entire amount if she returns an item.

According to a 2017 survey by Canada Post, a majority of respondents share Harrison's opinions. The survey found that 57 per cent of online shoppers won't buy items from a retailer that doesn't offer free returns by mail or courier.

However, 40 per cent of respondents said they would be willing to pay for returns if they split the shipping cost with the retailer.

Consumer expectation became industry standard

David Ian Gray, a retail marketing expert and founder of the Vancouver-based retail advisory DIG360, said free returns were originally intended to make online shopping more attractive to peoplemore used to buying in-store.

They became particularly important in the fashion industry. After all, clothingnever quite looks, feels or fits exactly like the image on a website suggests it will.

"The crux of it is, consumers are pretty good gamers," Gray said. People figured out that insteadof trying on several sizesin a fitting room, they could buy multiple sizes, keep the one that fitand return the ones that didn'tfor a refund.

Over time, free returns grew into a consumer expectation and an industry standard one that carriesheavy costs for retailers.

"Even getting back to a warehouse here in Canada, and then unpacking it in the warehouse, [then] finding a place to store it where it can be retrieved all that handling is labour-intensive," said Gray.

While charges for online returns are becoming more common, hesaid retailers are considering other measures, too.

One option is simply increasing pricesto make up for projected return expenses. Another is introducing membership tierswith free returns included as a higher-tier perk.

Some brands have personalized their online stores to provide as much information on fit, colour and other features to ensure shoppers don't need to buy several versions.

High-end Canadian shoe brand Fluevog, for example, includes several explanationsabout thefit of itsproductsand offers live chats with representatives to lead shoppers through the buying process much like speaking to a clerk in a physical location.

"They're trying to slow down people's experience on the site so that when they do check out the item, that they've done fairly good due diligence, that that is exactly what they want," said Gray.

WATCH | The high environmental cost of free online returns:

Why free online returns are terrible for the environment

4 years ago

Duration 0:42

Between 30 and 40 per cent of all online purchases are sent back. You may not realize it, but those returns are actually costing the environment, one expert says.

Returning it forward

Anthony Kentris, co-founder of the clothing company Good for Sunday, offers a unique solution calledEcoDrop: if a customer buysan item they no longer want, they can get a full refund by shippingit directly to the next customer.

Kentris says the solution uses less fuel and reuses the item's original packaging which is made of recycled and recyclable material. It also saves Good for Sunday money.

"It's very expensive for a small business like us to keep up with the standards of free returns that larger companies have set."

Amazon, the largest online retailer in the world, has long allowed free returns, something experts sayhas repercussions for the environment and business.

Shipping an item from a customer in Ontario to Good for Sunday's headquarters in Toronto costs $12, Kentris says. To ship fromB.C., it jumps to $25 or more.That cost was especially high during last year's floods on the West Coast.

"If we have our margins on our business and we're paying out of pocket $25, there goes almost all of our profits," he said.

To make EcoDrop a more attractive option, Good for Sunday charges $12 for a traditional return. Kentrissays thatin the few months since it was introduced, about half their customers are choosing EcoDrop.

Good for Sunday's website advertises that its products are made of eco-friendly materials and made with ethical labour, so for Kentris, it's also about doing his part to offset environmental costs.

"When you return an item, a lot of the timethat just ends up in a landfill. So if brands were to adopt this, that would help eliminate all that waste," he said.