goTRG CEO Sender Shamiss discusses the rationale behind retailers' increasing use of 'returnless refunds' or 'keep it' policies and how they have sophisticated algorithms designed to deter fraud. Major U.S. retailers like Amazon and Walmart have adopted these policies as the cost of handling returns hit $248 billion in 2023, according to the National Retail Federation (NRF). Particularly for low-cost items, the expense of shipping and processing often equals or exceeds the item's value. The risk of damage during transit and environmental costs make it more feasible to allow customers to keep the products while still issuing refunds.
Mr. Shamiss notes the use of advanced algorithms to differentiate between excessive returners and genuine customers. He explains that the decision to allow a customer to keep an item is based on a calculated "formula of everything you buy and the projected net profit or gross margin that the retailer will make on that particular customer. If you're trusted, you're going to get to keep your item basically 75% of the time," he added.
The article highlights the stark contrast between America's high return rates—about 30%—and countries like Japan, where the rate of returns is only 3%. This significant difference is attributed to America's consumer culture, which encourages purchasing with the assurance of easy returns. This behavior has led retailers to experience 'return anxiety,' with the value of returned goods nearing $1 trillion annually. To combat these challenges, retailers are exploring new strategies like virtual fitting rooms. However, returnless refunds have become a popular solution, with a goTRG survey indicating that 60% of American businesses now use this approach to reduce waste and costs.
