Retailers face another challenge during coronavirus: Handling returns

An employee rings up a customer at the Macy’s Inc. flagship store in New York.

Ron Antonelli | Bloomberg | Getty Images

A new reality for retailers includes temporarily shuttered storefronts and steep sales declines. Part of that equation includes a more complex issue: Handling shoppers’ returns.

Macy’s, Gap and other retailers are adjusting return windows to ease customers’ worries about getting their money back, if they buy clothing and other items online as stores are dark.

Longer return windows add another level of complexity to how retailers are managing their businesses during the coronavirus pandemic. Most are still unsure of when their shops will be able to safely open again. And some are operating their online businesses with reduced staffing — after having furloughed store and warehouse workers, as business dried up and states ordered nonessential retailers shut.

The challenges — such as trying to resell returned merchandise and simply finding enough workers to help process returns in distribution centers — could end up hurting department store chains and apparel retailers the most. Typically, about 17% of apparel is returned to retailers, making it one of the most-returned categories of goods, according to an analysis by 1010data.

Even before Covid-19 hit, consumers were buying fewer clothes. Now, shoppers are unlikely to be pondering buying a new dress, jacket or pair of shoes, with offices closed, parties canceled and vacations on hold. Many are spending afternoons at home in pajamas or similar loungewear.

Add that to the fact that the U.S. workforce has shrunk by 10% in three weeks, amid a wave of coronavirus-related furloughs and layoffs. Many shoppers will be cutting back on discretionary spending, at least for the foreseeable future.

The average apparel retailer saw a 13% drop in online sales from March 12 to March 25, compared with a baseline of sales from Feb. 1 to March 10, according to data from Adobe Analytics.

But as time drags on, that could change. Many apparel and accessories businesses, including Nike and Everlane, have been dangling deep discounts for new spring merchandise online, to try to make a sale. As the weather turns even warmer, some consumers could be itching for fresh, pastel-colored outfits to fill their closets.

“If anything, Covid-19 will accelerate the shift to e-commerce from physical retail,” Happy Returns CEO David Sobie said. Happy Returns operates hundreds of drop-off kiosks across the country, partnering with brands such as shoemaker Rothy’s and apparel retailer Revolve, to accept their returns there. Its locations are temporarily closed due to the virus.

“This shift will mean more returns, due to the limitations of shopping online and the way people shop, which often involves ‘bracketing,’ or buy to try, buying multiples of size, color … with the intention of keeping their favorite and returning the rest,” Sobie said. “With an increase in returns, retailers will need to focus on cost-effective solutions that are friction-free for shoppers.”

Retailers extend return windows

Taking some measures already, a number of retailers have adjusted their returns policies during the crisis, allowing shoppers more time to get to the post office, or to a store once it reopens. Some businesses warn that it could take longer to get your money back, however, with warehouses understaffed.

Gap said that for purchases made between Jan. 1 and March 31, the retailer has extended its return window to July 1.

Kohl’s already has a long window of 180 days for returns. But for those shoppers who need extra time, that period will be extended to 30 days from when its stores reopen, the company said.

Makeup retailer Sephora has said that for purchases made in its stores after Feb. 15, it will accept returns for up to 30 days after its stores reopen, so long as you have a receipt. For online returns, its standard 30-day window has been doubled to 60 days.

Lingerie maker Victoria’s Secret is extending its current return policy for an extra 30 days.

Amazon said that most items ordered from Amazon directly or from third parties between March 1 and April 30 can be returned until May 31.

Department store operator Macy’s is giving customers an extra 60 days from the original purchase date to make a return. It said items purchased in a store, however, must be returned to a store. And it warned on its website that because it has temporarily reduced staffing across its warehouses, the processing of returns could be delayed.

‘A lingering fear of walking into stores’

The Covid-19 crisis could also end up backpedaling many retailers’ efforts over the past year to encourage shoppers to bring returns to stores. This method saves the company money on shipping and transportation costs, especially if it offers shoppers free returns online — they’re not free for the retailer. Additionally, the hope is that by bringing a shopper to the store to make a return, the shopper might buy something else.

But as businesses begin to reopen, shoppers will likely be wary of returning to stores and malls in droves, after being advised for months to maintain 6 feet of distance from other individuals.

Once they feel comfortable leaving the house, many consumers will likely be looking to make a return via their local post office, FedEx or UPS store.

“There is going to be a lingering fear of walking into stores,” in a post-Covid-19 world, BMO analyst Simeon Siegel said. 

“There has been a perpetual push to prodding consumers to return products in stores,” he said. “That likely dissipates. … [Coronavirus] will probably hurt … return-to-store.” 

The crisis also raises the question of what companies will be doing with all of that returned merchandise after this pandemic passes. It might not be as easy to resell certain items that have been handled by other consumers. Extra precautions will likely need to be taken, knowing that the coronavirus can last for days on surfaces, according to one study

“I could see some rejection criteria potentially getting more stringent about what will be resold versus donated, but I don’t think those decisions behind the scenes will be visible to shoppers,” Happy Returns’ Sobie said. 

Read all of CNBC’s latest and up-to-date coronavirus coverage here. 

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