Brands’ free returns policy leads to catastrophic rise of serial refunder

According to new research by Paymentsense, 78 percent of customers are more likely to purchase from a brand if they offer free returns. The card payment provider then analyzed search volumes for the top 500 retailers in the UK to discover the most popular brands based on their returns policy. Of the top 20, it’s no surprise that Amazon came out on top, offering returns on most items within 30 days and clocking in almost 4,400 monthly searches regarding its policy. Amazon returns can now be dropped off at Kohl’s, UPS or Whole Foods stores without the customer having to box up the item or even print a return label.

Coming in second place but with over 60 percent less monthly searches on its policy than Amazon is Asos which offers free returns within 28 days. Shein, Zara and Boohoo round out the top five with Shein standing out for offering a returns period of 60 days, double its immediate competitors. Nike and Adidas are the only other brands in the top twenty which offer a 60 day period although this grace does not extend to the Yeezy line sold by Adidas which offers a 14 day returns period. Likewise Apple products must be returned within 14 days.

While a brand’s returns policy clearly preys on a consumer’s mind before they make a purchase, 6 of the top 20 brands recorded by Paymentsense do not offer free returns. These include Uniqlo, Overstock and Sports Direct and shipping costs for returns are the customer’s responsibility.

52 percent of shoppers say they are unlikely to use an online retailer again if they’re charged for returns. The ease with which consumers can return an unwanted product has created a wave of “serial refunders” who order more than they need or want. One in every three customers returns a product once a month. This adds strain to a business’s supply chain and in 2021 cost the average UK small business the equivalent of 20,500 dollars a month. A report by Clear Returns cited by Paymentsense states that returns cost UK retailers an estimated 78 billion dollars a year on average, 26 billion of this total coming from online shopping. January remains the biggest month for refunds with a 39 percent increase year-on-year as consumers offload unwanted Christmas gifts.

Amid calls for card machine providers to consider new solutions for businesses that offset the expense of returns and align with customers’ shopping behavior is concern for the profound impact on the environment. Returns are most likely destined for landfill or to be burned.

Returns from online shopping at all-time high in the US

In a January 2022 report by CNBC, the CEO of returns solution provider Optoro, Tobin Moore, is interviewed regarding the avalanche of returns within the US: “From all those returns, there’s now nearly 6 billion pounds of landfill waste generated a year and 16 million metric tons of carbon dioxide emissions as well. That’s the equivalent of the waste produced by 3.3 million Americans in a year.” Online purchases are almost 3 times more likely to be returned than items purchased in store and the National Retail Federation reports that in 2021 a record 761 billion dollars of merchandise was returned, 10.3 percent of which was fraudulent. Third party sellers on Amazon report throwing away about a third of all returned items.

“The rising dominance of online shopping was predicted to happen due to convenience and easier price comparison,” says Jon Knott, Head of Customer Insights at Paymentsense. “However, this transition was sped up massively during the pandemic as lockdown restrictions caused more people to stay at home, as opposed to heading out physically to the shops. As online shopping continues to rise in popularity, businesses are seeing higher levels of product returns as consumption increases to an all time high.”

The most common reasons for requesting a refund are ordering the same item multiple times or the item not arriving in its advertised condition. The third most common reason, “wardrobing,” a phenomenon often associated with social media where someone buys the item to post photos of themselves wearing it, then has no further need for it. It can also refer to a customer ordering three different sizes to try on at home with the intention of returning the two unwanted items. The consumer may not be aware that those items will often not be sold on, but the demand for brands to meet expectations of satisfactory customer experience has immeasurable hidden costs.