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Why some retailers are still leaning into returnless refunds

Some of the largest retailers are continuing to process refunds for items while also telling customers to keep the items, creating a situation where retailers are essentially giving away products.

“It started with keeping the consumer happy, and then you added the cost components,” Steve Rop, chief operating officer with goTRG, a company that works with companies such as Walmart, Sam’s Club, and Lowe’s to process returned items, told Yahoo Finance.

Returnless refunding is not a new policy but boomed during the pandemic. Now, as consumers shift their spending habits amid resilient inflation, retailers are being weighed down by too much stuff: Target (TGT), Walmart (WMT), Gap (GPS), American Eagle (AEO), and others have recently reported bloated inventory levels.

At the same time, as Rop noted, many returns simply aren't worth the trouble.

The expense associated with processing returns is “about a $30 project just on average," Jan Kniffen, CEO of retail consultancy J Rogers Kniffen Worldwide, told Yahoo Finance in a phone interview. "So if the item costs less than $30, it's really hard to justify figuring out what to do with it, as opposed to say, 'just keep it.’"

Kenis Montiel of Los Angeles County was pleasantly surprised when she tried to return a backpack she purchased online from Target. The retail chain issued her a refund but told her to keep the item.

"It was a little odd but in a way I felt like it's a perk and it made me feel like, 'Okay, I'm more comfortable coming to return something to Target,'" Montiel told Yahoo Finance. "And that's what I like about Target, that it's so easy on returns and exchanges."

Target did not respond to a request for comment.

An example of an email sent to a customer about their return.
An example of an email sent to a customer about their return.

Returnless refunding does bring certain benefits to retailers.

Recent research from Dotcom Distribution showed that more than 50% of online shoppers in 2022 said the experience of a returnless refund made them want to purchase from a brand again, increasing 11% from 2021, while 34% said it makes them want to donate unwanted items.

At the same time, Kniffen said, retailers know that the policy comes with a risk since companies clearly "don't want to get to the point that you don't take anything back and everybody knows it."

Consequently, she added, the policy is often applied to situations where the products fall into the "category of: 'They're just really not worth the loss and damage on the item,' especially apparel... you get it back, but it's really not sellable again."

A shopper carries a Target paper bag in the Manhattan borough of New York City, New York, U.S., March 1, 2020. REUTERS/Jeenah Moon
A shopper carries a Target paper bag in the Manhattan borough of New York City, New York, U.S., March 1, 2020. REUTERS/Jeenah Moon

Returned products are also handled in different ways depending the condition of the item. If the item is in good condition, the item will go back on the shelf at same or lesser price. Even so, some of the products can be refurbished and sold for less or offloaded to liquidators for resell.

"There'll be more and more decisions made that, say: 'This thing costs us more to take back than we can ever get out of it," Kniffen said. "'Let's not take it back unless we think we're being gamed.'"

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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