Retailers Cracking Down on Returns
The Rise of Pay-to-Return Policies
It’s no secret that retailers are cracking down on returns. In 2023, 81% of U.S. retailers implemented pay-to-return policies in some capacity. Amazon, Macy’s, T.J.Maxx, Walmart, and Staples all rolled out changes to their established return policies. This may look like shrinking return windows, charging for some returns, or in some cases simply telling shoppers to "keep it".
The Cost of Returns
Shoppers racked up more than $5 trillion worth of retail sales in the U.S. last year, according to the National Retail Federation. About 14.5% of those sales were returned. That equates to an enormous value in returned goods: $743 billion in 2023 alone. "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."
The Role of Third-Party Loss-Prevention Services
The recent changes are just the latest effort to tamp down on return losses. Many large retailers in the U.S. have long been engaged in the practice of quietly tracking and targeting return behavior. According to a report by The Wall Street Journal, U.S. retailers use third-party loss-prevention services to track risky return behavior. This doesn’t outright mean fraudulent activity, but rather behavior that "mimics" or could be linked to such behavior.
The Retail Equation
The most notable third-party loss-prevention service is The Retail Equation, a software provider that tracks return behavior that retailers deem potentially fraudulent. It then 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.
Unaware Shoppers Left Blindsided
The problem is, 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 that they were left with no way of knowing or remedying the information until after their return was rebuffed.
Conclusion
The practice of tracking and targeting return behavior is a complex issue, and shoppers should be aware of the potential consequences of their return behavior. Retailers must balance the need to reduce return losses with the need to maintain customer trust and satisfaction. As the retail landscape continues to evolve, it’s essential for shoppers and retailers to work together to find a solution that benefits both parties.
Frequently Asked Questions
Q: What is The Retail Equation?
A: The Retail Equation is a software provider that tracks return behavior and assigns a return score to shoppers based on the data provided by retailers.
Q: How does The Retail Equation work?
A: The Retail Equation tracks return behavior that retailers deem potentially fraudulent and assigns a return score to shoppers based on the data provided by retailers. This score can 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.
Q: Are all retailers using The Retail Equation?
A: No, not all retailers are using The Retail Equation. According to the article, Best Buy ended its relationship with The Retail Equation in 2019.
Q: What can shoppers do to avoid being flagged as a "problem returner"?
A: Shoppers can follow a store’s return policy and avoid returning items that are damaged or show signs of wear and tear. They can also contact the store’s customer service department if they have any questions or concerns about their return.
