- Returns are costly for online retailers.
- Having a brick-and-mortar outlet, however, can cut down on the logistics cost of shipping returned items back to distribution centres.
- Amazon, for instance, is trying to make it easier to return items in person through dedicated storefronts and partnerships with department stores like Kohl’s.
It’s no secret customers love the convenience of free, two-day shipping.
But when it comes to returns, most people would prefer to just pop over to a nearby store. Nearly 60% of Americans prefer returning purchases to a physical store, according to a UPS study.
And returns are cheaper for retailers when made in stores. That’s a bonus for stores that sell both online and in physical stores.
If the retailer is footing the bill, shipping back returns costs retailers twice as much than when the customer takes it back to the store themselves. According to AlixPartners, the returns process costs retailers $US3 per package when customers return them to a store or up to $US6 per return when shipped to a distribution center. It costs $US8 per return when returned to a third-party processor.
Online retailers recoup some of that cost by charging a fixed fee for returns using the prepaid return label, which is deducted from the total refund amount, or with no cost attached but the customer must pay to send the item back. Amazon does this for most merchandise, apart from some items like clothing.
Amazon is able to subsidise the limited returns it offers for free through its Prime membership fee and cloud computing service Amazon Web Services, Antony Karabus, CEO at HRC Retail Advisory, told Business Insider.
But some stores, like ASOS or Amazon-owned Zappos, don’t charge anything at all for returns.
This reveals a real advantage for retailers who have a real network of stores. They can process returns in-store, which is cheaper for them and more in line with what customers want to do anyway.
Walmart highlighted this bonus in 2017 when it debuted its Mobile Express returns, a new offering for users of its app. Customers can initiate a return on the app and simply hand the item off without waiting in the general returns line.
Walmart estimates that 90% of the US population lives within 10 miles of one of its more than 4,700 stores, and easy and free returns could mean customers are likely to pull the trigger on that item they’re eyeing on Walmart.com.
It’s likely Amazon realises this limitation. It’s investing heavily in other ways to make returns cheaper for them and easier for consumers, including returning them to Amazon pickup locations or some Kohl’s department store locations through an expanding partnership. These two drop-off options are free.
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