Retailers Crack Down on Returns: New Measure to Combat Losses
The Rise of Pay-to-Return Policies
In 2023, 81% of US retailers implemented pay-to-return policies, a significant change from previous years. Amazon, Macy’s, T.J.Maxx, Walmart, and Staples are just a few examples of major retailers that have rolled out new return policies. These changes include shrinking return windows, charging for some returns, or in some cases, simply telling shoppers to "keep it".
The Economic Impact of Returns
Shoppers racked up more than $5 trillion worth of retail sales in the US last year, according to the National Retail Federation. About 14.5% of those sales were returned, equating to an enormous value of $743 billion in 2023 alone. However, the high cost of processing returns is a significant concern for retailers. "Most of the returns that come back cost up to 40% of the original retail price to put that item back on the shelf," said Robert Overstreet, Iowa State assistant professor of supply chain management. "There’s no guarantee they can sell it for what they originally asked for it, so they’re losing money on both ends."
Third-Party Loss-Prevention Services
Many large retailers in the US have long been engaged in the practice of quietly tracking and targeting return behavior. According to a report by The Wall Street Journal, US retailers use third-party loss-prevention services to track risky return behavior. This doesn’t necessarily mean fraudulent activity, but rather behavior that "mimics" or could be linked to such behavior.
The Retail Equation: A Software Provider
The most notable third-party loss-prevention service is The Retail Equation, a software provider that tracks return behavior deemed potentially fraudulent by retailers. It assigns a return score to shoppers based on the data provided by retailers, giving the software the ability to override a store’s return policy, leaving shoppers with no refund and a printed notice directing them to The Retail Equation’s website to explain why their return was blocked.
Concerns and Controversies
The problem is that many shoppers are unaware this type of tracking is even happening, leaving many feeling blindsided when they get to a return counter and are told they are not getting their money back. Or, even worse, they get banned from the practice of returning products to the store altogether. According to several now-dismissed lawsuits and Better Business Bureau complaints, customers reported they were following a store’s return policy and were still issued a warning. Some customers complained the information found on their report given by The Retail Equation was incorrect, and they were left with no way of knowing or remedying the information until after their return was rebuffed.
Conclusion
The rise of pay-to-return policies and the use of third-party loss-prevention services are just two of the measures retailers are taking to combat the staggering cost of returns. While these measures may be intended to reduce losses, they have raised concerns about the impact on consumers. As the retail landscape continues to evolve, it is essential to strike a balance between protecting retailers’ bottom lines and ensuring fair and transparent practices for shoppers.
Frequently Asked Questions (FAQs)
- What is The Retail Equation?
- The Retail Equation is a software provider that tracks return behavior deemed potentially fraudulent by retailers.
- What is the purpose of The Retail Equation?
- The purpose of The Retail Equation is to assign a return score to shoppers based on the data provided by retailers, giving the software the ability to override a store’s return policy.
- How does The Retail Equation work?
- The Retail Equation tracks return behavior and assigns a return score to shoppers based on the data provided by retailers. The software then gives the ability to override a store’s return policy, leaving shoppers with no refund and a printed notice directing them to The Retail Equation’s website to explain why their return was blocked.
- What are the concerns with The Retail Equation?
- Many shoppers are unaware of this type of tracking, leaving them feeling blindsided when they get to a return counter and are told they are not getting their money back. Additionally, some customers have reported receiving incorrect information from The Retail Equation, leaving them with no way of knowing or remedying the issue until after their return was rebuffed.
