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How Are Returnless Refunds Impacting Retail?

With the pandemic fueling the transition into digital shopping, eCommerce has increased by 43% since 2020. As online shopping continues to supersede conventional shopping, so does the number of returns. In 2021, 16.6% of all retail goods were returned. As such, it’s important for retailers to implement effective and convenient return policies. In a digital shopping experience, the return process becomes even more impactful to customer satisfaction.  Although online shopping provides many benefits such as convenience and availability, it naturally leads to a higher return rate. Poor return policies can be expensive for companies and annoying for consumers. CNBC reports that the average return represents 30 percent of the purchase price. Additionally, 91% of consumers said that a store’s return policy was an important factor in a purchasing decision. So, having an adequate return policy is key to attracting and keeping customers. One strategy that is growing in popularity for retailers is “returnless refunds.” 

Impacts of Returns 

Thirty percent of online purchases are returned, which is about three times the return rate of physical stores. Additionally, returns cost between $10-$20 for each product, and most products aren’t able to be sold at full price once they are returned. For heavy and bulky items, retailers often lose money on returns.  

Not only are returns expensive, but they are also frustrating for consumers. As shoppers deal with retailer-caused returns, such as products that aren’t true to size, inadequate quality, or contain misleading information, it can leave a bad impression on customers. In fact, 42% of customers will stop shopping at that retailer and 72% will leave a negative rating. One way for retailers to address this is to post accurate product descriptions on their sites so that the consumer can make better purchasing decisions using as much information as possible.  

What’s Happening Right Now? 

Since the COVID-19 pandemic, the supply chain has been suffering, and returns have put an even greater strain on retailers.  

The supply chain crisis coupled with soaring gas prices is putting major pressure on retailers’ return policies. In recent weeks, retailers such as Target and Walmart have reported having too much inventory and increased overhead from storage costs. Along with a growing inventory stock, retailers must worry about returns. So, instead of adding more to the stockpile, retailers are considering returnless refunds.  

What are Returnless Refunds?

Returnless refunds are part of a policy in which customers can keep the items they don’t want and still receive a refund. This is certainly convenient for the customer, and may save costs for the retailer, but there is also a caveat. Returnless returns open a door for fraud and return abuse. Consumers could take advantage of this return policy, so loss prevention strategies should be implemented.  

Returnless refunds have many rewards including a generally simple and frictionless return process. Returns can be extremely expensive for retailers. Data indicates that 11%–13% of returned purchases cost twice as much as their sale price to process. Furthermore, they can be a huge pain for consumers. The easier the return process, the more likely a customer will be to return.  

Not only will the return process be very minimal, but a positive return experience will also attract repeat and new customers. Timely and effortless returns will keep consumers feeling like their shopping experience matters. Consumers should feel secure knowing if something goes wrong in a purchase that they will be fully refunded and taken care of.  

However, there’s a large drawback to returnless refunds. This type of return relies on customers not taking advantage of the policy. Retailers could lose revenue from consumers who submit a return claim as a loophole to receive “free products.” As such, when retailers decide to implement this system of refunds, they must be mindful of potential return abusers and scammers. There are methods to mitigate this risk, such as setting conditional rules for offering returnless refunds depending on value and shipping cost. Companies will often not publicize this policy and make returnless refunds on a case-by-case basis to avoid potential abusers.     

The Future of Returns 

Learning how to optimize your return policy will be crucial in a growing digital world. Maintaining a financially sound return policy, while keeping customers happy, will help your business both internally and externally. As inflation, gas prices, and the supply chain keep retailers on their toes, retailers must assess what return policies work best for their company and their consumers.  

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Contributions by Leah Harding

Tags: eCommerce, Retail, Retail Trends