$1 Return Fee
Free returns while shopping online is a benefit most consumers have come to expect. But Amazon (AMZN), which processes a significant number of returns, just announced this free lunch might be over.
The world’s biggest online store plans to start charging $1 to some customers if they choose to return items through UPS. This new policy will not apply to every online return, and Amazon will still process returns for free through physical locations such asWhole Foods, Amazon Fresh, and its partnership with Kohl’s (KSS).
In 2022, online returns accounted for $816 billion in lost sales for businesses — 17% of the total sales volume that year. With roughly 2 billion monthly visits, Amazon is surely feeling the pain from these widespread returns.
Since Amazon is by far the leader in ecommerce, this new policy may well set a new standard for other companies to follow. If the market leader is charging for returns, competitors could feel emboldened to implement similar policies.
In fact, some companies have already followed Amazon’s lead. Retailers including Foot Locker (FL), Kohl’s, and JCPenney have started deducting online return fees from the refund price. So if you buy a product for $50, you might only get $49 if you return it, assuming a $1 fee.
On the other hand, there’s no guarantee that other companies will rush to start charging for returns. Close competitors like Walmart (WMT) or Target (TGT) could potentially lean harder into free returns, in hopes of winning market share from Amazon.
Either way, consumers can expect to see a number of different strategies by retailers as they do their best to juggle boosting profits with customer satisfaction. For shoppers, that’s one more variable to juggle when choosing which businesses are the best for your budget.
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