The Hidden Costs of "Free" Returns: Let's Do the Math

Online shopping has become a convenient way for many people to purchase goods. With a few clicks, you can order what you need, and it will arrive at your doorstep in no time. However, what happens when you receive a product that is not what you expected? It’s simple – you return it. But have you ever thought about the hidden costs of “free” returns? Let’s do the math.

The Economics of Free Returns

From an economic standpoint, free returns can lead to unintended consequences. When returns are easy and free, it can lead to an increase in impulse purchases and overconsumption. Customers may order multiple sizes or styles of the same product, knowing that they can simply return the items that don’t fit or meet their expectations. This can result in higher demand for products, leading to increased production, shipping, and ultimately, higher prices.

Carbon Emissions of Returns

The environmental impact of free returns is also significant. Each time we return an item, it has to be shipped back to the retailer, which contributes to carbon emissions from transportation.

According to a study by Optoro, a technology company that helps retailers manage returns, “an average returned item travels roughly 2,400 miles, and roughly 5 billion pounds of returned goods end up in landfills annually.” This not only leads to higher carbon emissions but also contributes to the waste problem.

Calculating the Cost of Returns

To truly understand the cost of returns, we need to do the math. Let’s say you order a $50 shirt online, and it doesn’t fit. You decide to return it, and the retailer offers free returns. The retailer has to pay for shipping and handling costs, which can range from $5 to $10. 

In addition, they may charge a restocking fee of up to 20% of the item’s cost. In this case, the restocking fee would be $10. So, the total cost of returning the shirt would be $15 to $20.

Now let’s assume that the retailer has to process 1,000 returns per day, which is not uncommon for large retailers. The cost of processing these returns would be $15,000 to $20,000 per day, or $5.5 million to $7.3 million per year. These costs are often passed on to the consumer in the form of higher prices, making it essential to understand the true cost of “free” returns.

Reducing the Environmental Impact of Returns

To reduce the environmental impact of returns, customers can take a few simple steps. First, try to make informed purchasing decisions by reading product descriptions, reviews, and sizing charts before making a purchase. This can help minimize the need for returns in the first place. 

When making a return, try to consolidate your shipments as much as possible to reduce the number of packages being shipped. Finally, look for companies with sustainable return policies that focus on reuse and recycling. By being mindful of our shopping habits and selecting companies with greener return policies, we can help reduce the environmental impact of returns. 

Conclusion

In conclusion, the hidden costs of “free” returns are significant. Not only do they increase the cost of goods for consumers, but they also have a significant environmental impact. By understanding the true cost of returns, we can make informed decisions when shopping online and work towards reducing the environmental impact of returns. Thank you for your help in protecting our planet!