Retailers Offer Myriad Returns Options to Retain Customers

By Erica E. Phillips | Dec 26, 2017

After a strong holiday shopping season, retailers are bracing for a flood of returns—and not just at the customer service counter.

This year traditional and online retailers have expanded the number of locations and routes consumers can use to return merchandise, from in-store kiosks and lockers to the mall concierge, grocery stores, parcel shipping locations and at-home pickup.

“A lot more retailers are offering all the convenient options this year,” said Amit Sharma, chief executive of Narvar, a technology firm that helps retailers including Gap Inc., Sephora and Yeti Holdings Inc. with shipping and tracking purchases and returns.

Online retailer Amazon.com Inc. said it has expanded options for in-person returns this year, with a network of 2,000 “locker” locations, including 400 at Whole Foods stores, where customers can drop off items to be returned. Amazon also partnered with Kohl’s Corp. stores in Chicago and Los Angeles, which are accepting returns of Amazon goods bought online.

Wal-Mart Stores Inc. is touting its Mobile Express Returns kiosks, located in its stores, where it says customers can complete the return process in less than five minutes and receive a refund within a day or so.

Returns to Target Corp. and Wal-Mart are free—customers can either bring the items back to the store or print a shipping label online and drop off merchandise at a designated shipping location. Kohl’s and J.C. Penney Co. Inc. have similar policies, but don’t cover the cost of return shipping.

As shoppers increasingly turned to the internet for their holiday purchases this year, they were more likely to patronize e-commerce shops with speedy delivery and easy returns, analysts say. Online holiday sales are expected to top $107 billion this year, an increase of 13.8% over 2016 according to Adobe.

Returns have become a “battleground” among online retailers trying to attract and retain customers, said Tobin Moore, chief executive of Optoro Inc., a logistics provider that helps companies like Target and Best Buy Co. to take back and resell returned merchandise.

“It’s been a friction-filled part of e-commerce that has held back online shopping,” said David Sobie, CEO of Happy Returns, which accepts returns for several retailers at “return bars” in malls and some in-store locations. Shoppers that were new to e-commerce this year, “probably have more of a brick-and-mortar mindset when they think about service,” Mr. Sobie said. “People expect returns to be easy and free because that’s what’s expected in a store.”

Mr. Moore of Optoro estimates that goods purchased online are three times more likely to be returned as goods purchased in a physical store. In total, Mr. Moore said roughly $90 billion in holiday merchandise—purchased either in stores or online this season—will be returned over the next few weeks, with more than a third of it coming back before the new year.

With higher volumes of merchandise coming back through a wider variety of channels this year, analysts say handling the reverse supply chain can get costly.

“Those returns require extra manual work,” said David Bassuk, a retail consultant with AlixPartners LLP. Every item that comes back has to be checked for damage. If it is in good enough condition for resale, it may need to be repackaged and shipped to a store or warehouse. If it is damaged, it might need to be fixed. And by the time returned goods get back on the shelf, they could be selling at a significant discount.

One of the ways retailers lower those costs is to encourage shoppers to return items directly to a store. Items returned to the store cost a retailer roughly $3 to process and are available for resale within a day, according to AlixPartners. Items shipped back to a distribution center or third-party logistics provider cost $6 or more to process and take at least four days before they’re available for resale.

“Those costs are not insignificant,” Mr. Bassuk said.

Retailers see another benefit to in-store returns: customers sometimes make additional purchases after bringing back unwanted gifts. Analysts say Amazon’s expansion of its physical presence this year—in Kohl’s, Whole Foods and a handful of Amazon storefronts—was likely part of an effort to reduce the cost of handling returns and to match the in-person services traditional retailers offer.

Rebecca Salt, a spokeswoman for Amazon said customers have been “delighted” with the Kohl’s drop-off option. “We are continuing to innovate every day on how to make returns convenient and easy,” she said.

For shoppers who choose to ship goods back, parcel carriers have readied their networks for the holiday-season’s aftermath. FedEx Corp. told investors in a conference call last week that it has 10,000 locations across Walgreens Boots Alliance Inc. stores, grocers Kroger Co. and Albertsons Cos., its own FedEx Office storefronts and other locations, where customers can drop off items for returns. Rajesh Subramaniam, FedEx’s chief marketing officer, said that “the business of returns continues to grow in scale and complexity, especially for retailers.”

But it is decidedly less complicated for consumers this year, and it is getting easier, Mr. Sobie, of Happy Returns, said.

“This is the year that returns are finally getting their due,” he said.

—Laura Stevens contributed to this article

Write to Erica E. Phillip at Erica.Phillips@wsj.com

Article was originally published here.