By Suzanne Kapner and Paul Ziobro
Retailers have a new message for consumers looking to return an item: Keep it.
Amazon.com Inc., Walmart Inc. and other companies are using artificial intelligence to decide whether it makes economic sense to process a return. For inexpensive items or large ones that would incur hefty shipping fees, it is often cheaper to refund the purchase price and let customers keep the products.
The relatively new approach, popularized by Amazon and a few other chains, is being adopted more broadly during the Covid-19 pandemic, as a surge in online shopping forces companies to rethink how they handle returns. "We are getting so many inquiries about this that you will see it take off in coming months," said Amit Sharma, chief executive of Narvar Inc., which processes returns for retailers.
Lorie Anderson of Vancouver, Wash., was pleasantly surprised when she tried to return online purchases of makeup at Target and batteries from Walmart. The chains issued her a refund but told her to keep the items.
"They were inexpensive, and it wouldn't make much financial sense to return them by mail," Ms. Anderson, 38 years old, said. "It's a hassle to pack up the box and drop it at the post office or UPS. This was one less thing I had to worry about."
A Target Corp. spokeswoman said the retailer gives customers refunds and encourages them to donate or keep the item in a small number of cases in which the company deems that option is easier than returning the purchase.
A Walmart spokeswoman said the "keep it" option is designed for merchandise it doesn't plan to resell and is determined by customers' purchase history, the value of the products and the cost of processing the returns.
Amazon didn't provide a comment.
The number of e-commerce packages that were returned in 2020 jumped 70% from 2019, according to Narvar. More than half of the increase was due to higher e-commerce sales, Narvar estimated, while more than a quarter was the result of shoppers' not wanting to return web orders to physical stores. A smaller percentage was because people didn't get the right size -- either because their weight had changed during the pandemic or they were unfamiliar with the brand's sizing.
E-commerce returns could total as much as $70.5 billion for this past holiday season alone, a 73% jump from the previous five-year average, according to CBRE Group Inc., a commercial real-estate services and investment firm.
After handling a record three billion packages during the holiday season, the U.S. Postal Service and delivery companies are now receiving boxes that need to go back, including some of the two million whose arrival was delayed past Christmas, according to ShipMatrix Inc., a consulting firm.
United Parcel Service Inc. expected a 23% rise in returns the week of Jan. 4 from a year earlier.
FedEx Corp. said returns volume has set record highs for the past six months. But the percentage of items ordered being returned is a bit lower than normal because a big part of the increase in online shopping during the pandemic has been from purchases of essential goods, according to Ryan Kelly, a marketing vice president at the delivery company. "A lot of the e-commerce surge was not shoes, but diapers," Mr. Kelly said.
Delivery firms are working with retailers to help them reduce costs by providing scannable codes that consumers can bring to retailers such as Walgreens or UPS stores that accept the returns, according to industry executives. Walmart is allowing shoppers who purchase items online to schedule a time for FedEx to pick them up.
Processing online returns can cost $10 to $20, excluding freight, depending on the item, said Rick Faulk, chief executive of Locus Robotics, which uses robots to help automate returns.
"Returning to a store is significantly cheaper because the retailer can save the freight, which can run 15% to 20% of the cost," Mr. Faulk said. Online return rates run about triple those of purchases made in physical stores, he said.
In past years, retailers urged shoppers to return online orders to stores not only to reduce costs but also to boost sales because customers tend to make additional purchases while there, Mr. Faulk said. Doing so this year is problematic given capacity constraints on retailers and the reluctance of some consumers to frequent enclosed public spaces.
"Gone are the days of popping into stores without feeling anxious, so I'm doing almost all my returns by mail," said Brittany Connor, who lives in Philadelphia.
She recently tried to return a $16.91 cat harness she bought from the online pet retailer Chewy Inc. because it was too small. Chewy told her to donate the harness to an animal shelter. It refunded her the money and sent her a new harness in a bigger size. "I love that," said Ms. Connor, 32 years old, who works in public relations.
A Chewy spokeswoman said the company is committed to providing customer-friendly return policies.
Jan Edmiston, a Presbyterian pastor from Charlotte, N.C., ordered the wrong version of a book titled "What Lies Between Us." Instead of an antiracism book, she bought a thriller by the same name. Rather than asking her to send it back, Amazon issued a refund and told her to keep it.
"How much money is Amazon making to be able to absorb these mistakes?" Ms. Edmiston asked. She has been using the errantly ordered book to prop up her laptop for Zoom calls. She plans to give it away.
Cybercriminals are getting wise to these new return techniques.
"People do this for the sport of it, not just for monetary gain," said Yuval Ben-David, an analyst at Sixgill, a cybersecurity company.
The most common method is to claim an item didn't arrive or was defective, Mr. Ben-David said. Then the criminals use social-engineering techniques to try to persuade the retailer to issue a refund. One common technique among scammers is to claim to be afraid to sign for packages during the pandemic for fear of catching Covid-19, he said.
About a quarter of all dark-web chatter about return fraud in the past year focused on Amazon, according to Sixgill. The criminals say Amazon's algorithms are more likely to detect fraud if the account is newly opened, which has led to a secondary market for older accounts, according to Mr. Ben-David.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
January 10, 2021 05:44 ET (10:44 GMT)Copyright (c) 2021 Dow Jones & Company, Inc.