Amazon (AMZN) has built its e-commerce empire by making shopping affordable and foolproof. You didn’t like the pan you bought on Amazon No worries, you had free returns.
However, the days of across-the-board free returns are over Amazon is instituting a $1 fee on some returns, marking a notable shift from the company’s early days when the ethos was grow-at-all-costs.
Yahoo Finance spoke to five retail experts about this sea change, and they did agree that this was a long time coming and retail at-large is moving in this direction.
“I think the industry should be kissing the ground Amazon walks on for returning the sector to some semblance of economic sanity,” Professor Mark Cohen, director of retail studies at Columbia Business School, told Yahoo Finance. “There’s nothing in this life that’s free, so returns that are free create a tremendous burden for retailers. They’re finally going from a ‘laissez faire’ view. This sort of move had to be inevitable.
John Talbott, senior lecturer at Indiana University’s Kelley School of Business, noted that Amazon’s newly-minted return fees are also directed towards a specific sort of customer.
I think this effort is targeted at consumers that are gaming the system, Talbott told Yahoo Finance. “By that I mean, they are consistent, testers, and returners. By doing this, Amazon is essentially taxing the behavior of a small part of the overall population, and being better able to serve those that are legitimately acquiring a product or service, and fully intend to use it.
The data on what returns cost retailers is staggering: In 2022, customers sent back around 17% of the merchandise they bought, worth $816 billion, per National Retail Federation data.
These returns are such a burden for retailers, not only as a logistical cost, but as a supply chain problem,” Cohen added. “Merchandise doesn’t return to the same warehouse, and that merchandise also usually has to be resold as a distressed product.
No-return-fee policies just weren’t built to last, CEO of Merchandising Metrics Jeff Sward told Yahoo Finance.
“It was absolutely inevitable,” he said. “‘Free’ became the most expensive word in retail. Free shipping and free returns have been brilliant as customer acquisition tools, but they now need to be looked at as an investment in building a customer base. That investment needs to see some ROI at some point. Free returns provided a sort of safety net to get people comfortable shopping online – mission accomplished. The comfort of free returns has put the return rate through the roof, and it’s unsustainable.News Source: Yahoo Finance