This week we saw Walmart, Target and Amazon announce new return policies which would allow customers to keep small items with “relatively low value” even after issuing refunds. According to this recent article in Business Insider, “the policy is applied to a select criteria of products that are unlikely to be resold, where the cost of processing the return is equal to or greater than the cost of the product itself.”
Walmart isn’t disclosing its exact "keep it" threshold, but says the policy is designed to reduce the costs and environmental toll associated with returns as well as to ensure customer satisfaction. But with returns equating to significant costs in this non-sustainable model, including shipping and transportation fees and logistics, warehousing costs and customer-service hours, it’s clear that this move is a means for these retailers to “cut bait” on what could likely be a huge drag on their overall margins.
I have been writing about the logistics, cost and unsustainable issue for over a year in these past Forbes articles:
- Walmart Challenges Amazon on Sustainable Packaging
- Could Shipping War with Walmart Force Amazon to Bid for FedEx?
- Amazon: Past Its Prime
Online returns are expected to reach a record $70.5 billion for the holiday season just completed, a 73-percent increase from the previous five-year holiday average, according to an estimate from CBRE. And Locus Robotics Chief Executive Rick Faulk told the Wall Street Journal. "Returning to a store is significantly cheaper because the retailer can save the freight, which can run 15% to 20% of the cost.”
Reverse logistics are costly. Chances are we'll see more retailers who sell inexpensive items adopting the same approach as a way to cut costs. I’ve seen articles about Chewy, for example, which has been suggesting donating unwanted items shipped to customers for a while.
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