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Why companies like Amazon, Walmart, and Target have taken a new approach to returns by letting customers keep what they bought, even after issuing refunds

Business Insider logo Business Insider 2021-11-30 (Ben Gilbert)
a group of people standing in a room: Walmart Media Relations © Walmart Media Relations Walmart Media Relations
  • Major retailers are offering a new choice to customers for some returns: Keep the refunded merchandise.
  • For lower-cost items, it doesn't make financial sense for large retailers to process the physical return.
  • Walmart and Target confirmed as much to The Wall Street Journal earlier this year.

Some of America's largest retailers are processing refunds while telling customers to keep the unwanted items.

Walmart, Target, and Amazon were identified earlier this year as doing as much in a Wall Street Journal report.

Notably, we're not talking about free TVs and computers — the policy is applied in situations where the product is unlikely to be resold and where the cost of processing the return is equal to or greater than the cost of the product itself.

It's a policy intended for lower-cost items, and it's applied to customers with purchase history at a given retailer.

The biggest expense associated with processing returns is the cost of shipping, Rick Faulk, the CEO of Locus Robotics, told The Journal. "Returning to a store is significantly cheaper because the retailer can save the freight, which can run 15% to 20% of the cost," he said.

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Worse: Logistics have become a nightmare across the last year, with goods backing up at ports and in shipping containers still on boats — the ripple effect of issues from the height of the pandemic, when factory shut downs and explosive consumer demand eventually led to major supply bottlenecks across many consumer goods.

And after the COVID-19 pandemic kept Americans at home for most of last year, fewer people than ever ventured to stores to return purchases. According to the return-processing firm Narvar, online returns leaped by 70% in 2020, The Journal reported.

Given the sharp increase in online sales, it's no surprise that major retailers are reconsidering the expense of processing returns that incur shipping costs.

Also unsurprising: Customers enjoy keeping items they didn't have to pay for.

One woman in Philadelphia told The Journal she attempted to return a too-small cat harness to Chewy, which told her to donate the harness instead of sending it back — and replaced it with one in the correct size.

"I love that," she said.

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