Amazon popularized the concept of a returnless refund. But for smaller retailers, returns are still a constant source of stress, with around 9% of brick-and-mortar purchases and one in five ecommerce purchases returned.
Traditional returns drain resources because you need to account for the item’s return shipping cost, processing time, and restocking process. And sometimes the returned merchandise can’t be resold because it’s broken or single-use.
It’s no surprise that it costs retailers up to two-thirds of a product’s sale price to process a return. But it explains why returnless refunds are gaining traction.
This guide shares how Amazon popularized the concept, and how you can implement a returnless refund policy in your retail store.
What are returnless refunds?
A returnless refund is a refund granted to a customer without requiring them to return the merchandise. It’s a service popularized by ecommerce giant Amazon, but an increasing number store owners are introducing returnless refunds as they look for ways to cut the costs associated with returns.
The benefits of returnless refunds
1. Lower costs in the long run
Returnless refunds can actually be cheaper for the retailer than having customers ship the product back. Data indicates that 11%–13% of returned purchases cost twice as much as their sale price to process. Sometimes, you lose less money in the big picture by removing the return equation.
Nicole Leinbach Reyhle, founder of Retail Minded, says, “I believe returnless refunds will begin to become more prominent for lower-priced items and items that do not always make sense to ship back due to cost or inconvenience.”
2. Less friction for customers
More often than not, returning a product means submitting a refund request online or over the phone, printing out a shipping label, finding a suitable package for the product, packing it, and then driving to a drop-off location or post office to send it back.
That’s if returns are free for the customer. If not, customers also have to wait in line to pay for return shipping fees.
Returnless refunds remove every step except the first, which vastly improves the return process. And people who have positive returns experiences are more likely to be repeat customers.
When you have that data, it’s only logical to ask the question: How can we treat these customers even better? Returnless refunds is just the latest, and certainly won’t be the last, example of merchants making customers’ lives easier during the returns process.
3. Faster refunds
Refunds often take weeks to reach a customer’s bank account, since they don’t get processed until after the item is back on warehouse shelves. Customers find it frustrating having their funds tied up by a company whose product they don’t even have.
A returnless refund releases the refund almost immediately, thus helping increase customer satisfaction.
It’s why marketing consultant Trish Carey says, “I expect we’ll begin to see more retailers start to offer this; we saw an increase in it during the pandemic/holiday shipping season to ease the load on USPS and other shipping services, [among other reasons].”
4. Improved customer loyalty
By allowing shoppers to donate the item, you remove the hassle of going through the returns process and instead create feelings of goodwill (which they’ll then associate with your brand). Those positive experiences can create brand evangelists and transform first-time shoppers into long-term loyal buyers.
With ecommerce remaining at all-time highs, it’s likely return rates will remain high, and that’s an incentive for retailers to reconsider their returns approach.
5. Opportunity to reach new customers
Allowing the customer to keep unbroken items gives them an opportunity to pass the item along to someone else who may end up loving the product. This can act as a sample to bring in a new customer and increase margins rather than eating away at them with a costly returns and refund process.
6. Good for the planet
Five billion pounds of waste are generated through returns each year. Returnless refunds—particularly for defective products—are better for the environment.
Skipping the return shipping process reduces carbon emissions and preserves natural resources such as gas and plastic.
Best practices to implement a returnless refund policy
Amazon has done a successful job at implementing its returnless refund policy. Let’s take a look at best practices you can implement to do the same—without pouring money down the drain as a result of return fraud.
1. Use AI to set returnless refund rules
Leverage data to determine if and when a returnless refund makes sense.
Walmart, for instance, uses artificial intelligence (AI) to help set returnless refund rules. The technology processes different factors, like the customer’s purchase history, return processing costs, and your store’s returnless refund limit. With this information, the system can determine whether it would be better for the customer to keep the item.
An easy strategy for companies to experiment with returnless refunds is by using AI to determine if a SKU or category is performing below expectations. If an item is falling behind, cut your losses and refund those purchases without a return.
2. Consider the customer’s purchase history
If you have an active customer service team, consider allowing them to offer a returnless refund option at their discretion. They can use this process to reward loyal customers or improve a particularly negative experience.
You can also use AI to help guide a rep’s decision by leveraging your customer relationship management (CRM) to automatically:
- Highlight high-value regular customers
- Flag potential fraudsters who’ve requested excessive refunds
3. Offer on single-use/no-resale products
Many stores sell specific SKUs that aren’t resellable once a customer has received them, like hygiene or beauty products. Sephora, for instance, often has to throw away returned makeup (even if it’s still sealed) for health and safety purposes.
Returnless refunds suit this type of purchase because there isn’t a way to resell the product. You’d pay for shipping just so you can throw the merchandise out. At least if it stays with the customer, they may give it to a friend and build new customer relationships for you.
Take it from Lauralynn Drury, head of ecommerce and operations at LoveSeen, who says, “Our return rate is very low, but in the case when a customer isn’t happy and wants to return their lashes, we cannot accept and resell those products.
“We sought out a solution with flexibility around requirements for a physical return to allow us to be as sustainable as possible, but also manage our business’ needs. This has been helpful, and it also catches any customers who may try to abuse our flexible return policy.”
Returnless refunds on Amazon and other retailers
Amazon’s returnless refund system paved the way for this type of refund, but several mid-size and large retailers with ecommerce arms have already followed suit. Let’s explore their use cases to illustrate the ways returnless refunds can be deployed by store owners of all sizes.
Glossier is a cosmetics brand whose policy is to make returns as easy as possible.
While it doesn’t mention returnless refunds in its official returns policy, its approach is designed to provide each customer with personalized returns support. This makes it easy for support agents to make the final call on whether or not the customer should just keep the product, instead of shipping it back.
Returnless refunds can be such a strong retention play when the brand tells you to give it to a friend or something similar. I ‘returned’ something to Glossier and then it just sat in my drawer long enough that I eventually started using it … and now it’s my go-to concealer.
The Wall Street Journal reported Target has officially joined the ranks of returnless refunders. A spokesperson for Target said it only offers returnless refunds in a very small number of cases where it’s easier than returning the item, and that the practice has unofficially been used since 2018.
Chewy, an online pet supply retailer, has a very generous return policy. It officially offers returnless refunds on a case-by-case basis for prescription medications. However, the internet abounds with stories of its generous returnless refunds.
For instance, it’s common practice for the brand to refund a bereaved pet owner’s final automatic food purchase, telling them to donate the food. In one example, it even told a customer to donate a reptile enclosure that was accidentally ordered twice to their local shelter (and still gave the full $100+ refund).
Thinx is a retailer that sells period underwear. The nature of its product is very personal and certainly single-person use. Returnless refund options are not officially a part of its policy. Nonetheless, Thinx occasionally offers them.
In a statement given to Retail Dive, Thinx’s vice president of engineering and digital product, Brendan Hastings, said, “It just makes good business sense to reward our best customers instead of moving forward with a return that cannot be resold.”
Should your business accept returnless refunds?
The Amazon returnless refund policy is making more shoppers accustomed to no-return refunds.
That said, the returnless refund concept doesn’t work for every retail business. Evaluate your current returns policy and calculate how much money you’d lose by giving customers the option to keep their product and get a full refund.
Even if you only offer this option as a value-add for your very best customers, returnless refunds can be a smart way to increase customers loyalty and deepen relationships in the long term.
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Additional research by Kaleigh Moore.
Returnless refunds FAQ
What are returnless refunds?
Returnless refunds happen when retailers give customers a full refund without having to physically return the product. It’s a concept made popular by ecommerce marketplace Amazon.
What companies do returnless refunds?
Returnless refunds are not a common practice among retailers. However, some companies that allow returnless refunds include Apple, Best Buy, Amazon, and Walmart.
Why does Amazon do returnless refunds?
Amazon does returnless refunds to make the refund process easier and faster for customers. By eliminating the need to return an item, customers can receive refunds quickly, often within one business day. Returnless refunds also save time and money for Amazon, as they do not have to pay for return shipping and processing.