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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

00:08of those returns, like returning an air conditioner to Costco when summer ends

00:13thanks to their lenient return policy. So I tested out a few things myself to find out

00:19what our return habits say about how we shop.

00:22A report from the National Retail Federation projected that returns would reach $890 billion

00:33last year. That's up from $743 billion in 2023 and $816 billion in 2022. The majority of consumers

00:44surveyed said free returns are a huge factor when deciding where to shop. But why are return numbers

00:50still surging? Online shoppers may be some of the biggest contributors thanks to a trend called

00:56bracketing. You may not know, am I really going to like the blue one or am I going to like the beige

01:02one? So you order both and you know, that's an understandable consumer behavior. Founder and CEO of

01:09retail profit Doug Stevens said quality also plays a role. When we start to factor in brands like Timu and

01:16she and yeah, quality can certainly be an issue as well. You could you could probably throw Zara or

01:22H&M into that mix as well, where you may get something and it just looks, you know, nothing

01:27like what you thought it was going to look like. And so you you return it. If you're a Gen Z or a

01:34millennial today and you're you're going to five weddings a year or more and you know that, you know, all of these

01:42photos are going to be circulated within your social groups, then it's just, you know, sort of an unwritten rule that

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

01:55Stephen says consumers are feeling economic pressure and when retailers offer flexibility, some take advantage.

02:02Some stores are strict like Max Mara, which gives customers just 14 days to request a return.

02:09Others are far more lenient and once one brand makes returns easy, it's hard for others to reverse course.

02:16You really have to look at the pressure that Amazon was really putting on the rest of the retail industry

02:25industry to begin to adopt a policy 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 to

02:40return 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.

02:55This 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. Steven says returned products have to be written off or sold in the

03:24resale market for pennies on the dollar, creating strain on businesses. But a 2016 study in the

03:30Journal of Retailing found lenient return policies can increase returns but also purchases.

03:36In other words, the trade-off can drive long-term sales.

03:40The average retailer is dealing anywhere between 40% and 50% margin. So Costco has super skinny margins,

03:48but the difference is Costco is a membership program and it's really the membership revenue

03:54that drives Costco. And so returns for them are really just a show of goodwill towards members

04:02and a show of trust toward those members that keeps those memberships renewing.

04:07When I returned the inflatable, they didn't even look in the box. How did they know it wasn't

04:12covered in mud or worse? But maybe that trust is the point. Costco's renewal rate, meaning the

04:18percent of members who renewed their memberships for another year, hit 92.7% in 2023.

04:26That's nearly 80 million paying customers. We've pointed in the industry for years to

04:31brands 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.

05:15LLBeam, too, still allows refunds up to a year after purchase, though they ended their lifetime

05:21warranty in 2018 after customers abused the policy, with some even returning thrift store items they'd

05:28purchased. Nordstrom handles returns on a case-by-case basis, and their website reinforces Steven's point

05:35on building customer loyalty. It reads, we have long believed that when we treat our customers fairly,

05:41they in turn are fair with us. But that trust has limits. The same report from the NRF found 93% of

05:49retailers said fraud in the industry and other exploitative behavior was a significant issue for their

05:55business. Fraud in retail and fraudulent returns have always been a thing. But I think,

06:01you know, as long as I've been in retail, we've sort of looked at that as kind of a 1% factor.

06:06You 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 policy.

06:31Just this April, Sephora shortened its return window from 60 to 30 days, a policy that is unique to the

06:38U.S. In other countries, Sephora customers get just 14 days. Many suspect Americans have been

06:45conditioned to expect a guarantee on every purchase. Have people ever tried to like return like a product

06:52that's been fully used before? Yes. Oh, that's crazy. Yeah, that's why they did the 30 days now,

06:58because people were returning months later. Empty. But no matter how much the term free returns is

07:05advertised, there's really no such thing. What retailers would underestimate is the degree to which

07:12having merchandise returned to you, to you the retailer, and having to evaluate that merchandise

07:24for any damage, any staining, you know, is it saleable again? And getting that back into distribution

07:32is probably one of the most time-consuming and cost-inducing parts of the return process.

07:39For the consumer, it's really a matter of having to repackage the item, right, and get it to a courier

07:48or get it to the post office in order to return it. In the end, some returns are repackaged and resold,

07:55but a lot of returns never make it back to the floor. Stephen said they're written off and factored

08:02into the cost of doing business. For more on this story and others, head over to san.com

08:07or download our mobile app. I'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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