Major Retailers Are Considering Dramatic Return-Policy Changes
Target and Walmart may be on an Amazon-like path when it comes to returns.
Now, CNN is reporting that some major retail chains like Target, Walmart, Gap, and American Eagle Outfitters are considering a revamp of their return policies. They might let customers keep refunded merchandise — and Burt Flickinger, retail expert and managing director of retail consultancy Strategic Resource Group, told CNN it makes a lot of sense.
According to CNN, earnings calls in recent weeks reveal that there's an inventory surplus across categories — from clothing to furniture to toys — and storing it all comes at a high price.
Naturally, returns add a significant burden to that storage challenge. According to a survey by the National Retail Federation and Appriss Retail, retail returns hit an average of 16.6% in 2021 — up from 10.6% the year prior — adding up to more than $761 billion of merchandise that's likely to end up back in stores and warehouses.
Instating a "just keep it" return policy "would be a smart strategic initiative," Flickinger told CNN. "Retailers are stuck with excess inventory of unprecedented levels. They can't afford to take back even more of it."
If retailers opt to not put returned products back on their shelves, they can give them to liquidators to sell, including foreign liquidators for sale in Europe, Canada, or Mexico, or even enlist third-party firms to take complete control of all merchandise returns. But Flickinger points out that both routes incur extra costs for retailers.
Target and Walmart may be the latest major retailers toying with the idea of letting customers keep refunded merchandise, but they're not the first: Amazon launched a "returnless return" policy for certain cheaper, expensive-to-ship items several years ago.
Of course, a "just keep it" return policy has its drawbacks. Companies will need to carefully monitor customers' purchase-and-return patterns to make sure they're not taking advantage of the system to stockpile free merchandise.
Entrepreneur Editors' Picks
How an Encounter With the 'Armpit of Destiny' Helped the Founder of Grubhub Take His Business From His Apartment to a $2 Billion IPO
You Can Train Your Brain to React to Stressful Situations Better. Here's the 3-Step Process.
A Disastrous Valentine's Day Inspired This Founder to Launch Her Own Floral Brand. It Became a Celebrity Magnet With Retail Revenue Up 450% Since 2019.
What Is Your Dream Job? Ask Yourself These 4 Questions to Find Out.
This Is the Crazy Process This Juice Franchise Went Through to Get USDA-Certified Organic. But It Sure Has Paid Off.
No One Would Rent Me a Café in Trendy NYC Neighborhoods, So I Tried Something Risky. Now I Have 3 Coffee Shops.