Think before you buy: Returning products may lead to higher costs

Eventually, those costs for the company could be passed on to consumers.
Posted at 10:43 AM, Dec 20, 2023

MILWAUKEE — Boxes may be stacking up on your porch ahead of Christmas, but by next week you may be carrying those boxes right back to the post office to make returns.

Alex Milovic, an Associate Professor of Practice in the Marketing Department at Marquette, shared that over the last few years, returns have increased as more people turned to online shopping during the pandemic.

"Amazon's policy is so lenient, so customers get used to that," Milovic said. "Because you can't see it before you buy it, you're making a decision after it's already arrived at your house, sometimes you'll find customers buy three things knowing they only intend on keeping one item."

While generous return policies are nice for customers, companies often take a big hit. Companies like Amazon have even told customers to keep some products because the company doesn't want to pay for the return shipping.

"What we're finding this holiday season is you're saying 'I don't like the product, I'd like to return' and what they're saying is 'keep the product, we'll refund your money,'" Milovic said.

Large companies take a hit when it comes to returns, but small businesses feel the hit much harder.

"The bigger thing here is that if I'm a small retailer, it's very tough because I can't manage those cost controls," Milovic explained. "It's going to be more expensive for me to ship it to the customer than it would for a large multinational firm, so then if I have to take the return back, that's another shipping [cost]."

Eventually, those costs for the company could be passed on to consumers.

"Unfortunately it hurts all consumers, similar to theft. So the idea is that if products are being stolen then I have to put sort of a theft tax on it. The same thing for a return tax because I have to assume that a certain number of all products are going to be returned, then I have to charge more for all the products so I'm not losing money with every transaction," Milovic said.

Companies also may end up changing their return policies if returns continue in excess.

"They are collecting data and that's probably where this is headed," Milovic said. "They will start to put a cap on that soon."

So what can you do? Milovic said you should still return the items that aren't what you expected or weren't the right fit. But he also suggests being more conscious about adding things to your cart and pressing 'check out' when shopping online.

"It's more about making sure it's the right gift and the right products that you want to buy. If more of us start abusing the system, companies are going to put in barriers and controls and that's going to hurt all consumers," Milovic said.