What: Brands under pressure to generate profits are looking for ways to reduce costs without losing customers as they revamp their return policies.

Why it is important: 41% of the top 200 brands and retailers in the US charged a fee for customers to make returns by mail, up from 33% the previous year.

Returns have become even more costly for companies as the costs of freight and labor have gone up, while growth in e-commerce has slowed. Additionally, online return rates went up more than 5% in 2022.

As brands feel the pressure to cut expenses and improve their bottom lines, they are opening up to the idea of charging customers to ship their purchases back.

While brands have to share the burden of costs with consumers, they also face losing customers as a study found that 34% of 2,000 consumers surveyed stopped shopping with a brand after it started charging for returns.

Introducing features in the purchase journey to increase the likelihood of customers keeping their purchases or encouraging shoppers to buy more items rather than asking for a straight refund is key to retaining customer loyalty.

One example of this is offering incentives for exchanging their items. One activewear seller introduced a USD 6 handling fee while also increasing the credit it offered to customers who returned an item but purchased something new in the same transaction. The brand was able to keep 33% of the revenue it would have lost in returns and its retention rate has remained at 70% with the new fee.

Other brands have no plans to change their free returns policy, but are still looking to reduce the rate orders are shipped back at. This includes increasing the number of photos and using videos to better display item’s features and dimensions.

Should brands stop offering free returns?