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00:00Most, if not all of us have done it. We buy it, try it and return it. Some stretch the limits of

00:09those returns, like returning an air conditioner to Costco when summer ends thanks to their

00:14lenient return policy. So I tested out a few things myself to find out what our return habits

00:20say about how we shop. A report from the National Retail Federation projected that returns would

00:31reach $890 billion last year. That's up from $743 billion in 2023 and $816 billion in 2022.

00:42The majority of consumers surveyed said free returns are a huge factor when deciding where

00:48to shop. But why are return numbers still surging? Online shoppers may be some of the biggest

00:54contributors thanks to a trend called bracketing. You may not know, am I really going to like the

01:00blue one or am I going to like the beige one? So you order both. And you know, that's an

01:06understandable consumer behavior. Founder and CEO of retail profit Doug Stevens said quality also plays

01:13a role. When we start to factor in brands like Timu and Shein, yeah,

01:17quality can certainly be an issue as well. You could probably throw Zara or H&M into that mix

01:23as well, where you may get something and it just looks, you know, nothing like what you thought

01:28it was going to look like. And so you return it. If you're a Gen Z or a millennial today,

01:35and you're going to five weddings a year or more, and you know that, you know, all of these photos are

01:43going to be circulated within your social groups, then it's just, you know, sort of an unwritten rule

01:49that you don't wear the same thing twice. And so, you know, I think people are battling against

01:54that. On top of that, Stevens says consumers are feeling economic pressure and when retailers

01:59offer flexibility, some take advantage. Some stores are strict like Max Mara, which gives customers

02:06just 14 days just 14 days to request a return. Others are far more lenient. And once one brand

02:12makes returns easy, it's hard for others to reverse course. You really have to look at the pressure

02:20that Amazon was really putting on the rest of the retail industry to begin to adopt a policy

02:28whereby returns were frictionless, whereby returns were frictionless, where returns were free, and there

02:34were no questions asked. First, I went to Target to buy a shirt. Target gives customers a full year

02:40to return Target brand items with their receipt and 90 days for most other purchases. Next up, Sephora.

02:48Makeup stores like Sephora even let you return used makeup as long as it's within 30 days.

02:58This looks so stupid. Hold on. And Costco, where most items can be returned within 90 days.

03:05I am about to set up this inflatable in a shirt that looks oddly familiar, right?

03:12Now, it rained the weekend I tried it out. Mud, bugs, the whole works. I thought there's no way they'll

03:18take this inflatable back. Stevens says returned products have to be written off or sold in the resale

03:25market for pennies on the dollar, creating strain on businesses. But a 2016 study in the Journal of

03:31Retailing found lenient return policies can increase returns, but also purchases. In other words,

03:37the trade-off can drive long-term sales. The average retailer is dealing anywhere between

03:4340 and 50 percent margin. So Costco has super skinny margins, but the difference is Costco is a membership

03:51program. And it's really the membership revenue that drives Costco. And so returns for them are really just

03:59a show of goodwill towards members and a show of trust toward those members that keeps those memberships

04:06renewing. When I returned the inflatable, they didn't even look in the box. How did they know

04:11it wasn't covered in mud or worse? But maybe that trust is the point. Costco's renewal rate,

04:17meaning the percent of members who renewed their memberships for another year hit 92.7% in 2023.

04:25That's nearly 80 million paying customers. We've pointed in the industry for years to

04:32brands like Costco that have no questions asked, return it whenever you want, don't need a receipt,

04:40no problem. And that does create tremendous loyalty. That frictionless experience and that sense of

04:48trust that you have with your customer really does create a tremendous sense of brand loyalty.

04:55Same thing at Target. When I returned the shirt, I'd worn, no questions were asked.

05:00LL Beam 2 still allows refunds up to a year after purchase, though they ended their lifetime warranty in 2018

05:23after customers abused the policy, with some even returning thrift store items they'd purchased.

05:29Nordstrom handles returns on a case-by-case basis and their website reinforces Steven's point on building

05:35customer loyalty. It reads, we have long believed that when we treat our customers fairly, they in turn are fair with us.

05:43But that trust has limits. The same report from the NRF found 93% of retailers said fraud in the industry

05:51and other exploitative behavior was a significant issue for their business.

05:56Fraud in retail and fraudulent returns have always been a thing.

06:00But I think, you know, as long as I've been in retail, we've sort of looked at that as

06:04kind of a 1% factor. You know, 1% of the people that you're serving are there to scam you kind of thing.

06:13Take this now-deleted Reddit post of a bride asking, purchasing wedding day makeup,

06:19how much of it can I return? Most of the replies to this post called out how unethical and wasteful

06:24the idea was. But this bride wasn't the only person taking advantage of Sephora's lenient

06:30policy. Just this April, Sephora shortened its return window from 60 to 30 days. A policy that

06:37is unique to the U.S. In other countries, Sephora customers get just 14 days. Many suspect

06:44Americans have been conditioned to expect a guarantee on every purchase.

06:49Have people ever tried to like return like a product that's been fully used before?

06:54Yeah. Oh, that's crazy. Yeah, that's why they did the 30 days now,

06:58because people were trying to do it. But no matter how much the term free returns is advertised,

07:06there's really no such thing. What retailers would underestimate is the degree to which

07:13having merchandise returned to you, to you the retailer, and having to evaluate that merchandise

07:23for any damage, any staining, is it saleable again? And getting that back into distribution is probably

07:33one of the most time consuming and cost inducing parts of the return process. For the consumer,

07:41it's really a matter of having to repackage the item and get it to a courier or get it to the post

07:49office in order to return it. In the end, some returns are repackaged and resold, but a lot of returns

07:56never make it back to the floor. Stephens said they're written off and factored into the cost of doing

08:03business. For more on this story and others, head over to san.com or download our mobile app.

08:09I'm Kennedy Felton with Stray Arrow News.

The real reason stores let us return so much – even when it costs them

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