We’ve been reading a lot about changes in return and exchange policies for online retailers recently. A report in Business Insider piqued our interest with more detail than we’ve seen previously. The upshot for the TLDR crowd is that returns aren’t going to be free anymore.
Makes sense; after all the economic and environmental impact of returns is costly. And other recent articles have made clear that many times returned items aren’t returned to stock. They’re thrown out.
A returns management company parceLab estimated last year that a whopping 47 percent of online purchases were returned, costing retailers millions of dollars that couldn’t be recouped, eating into margins. Online retailers are taking a sharp look at how big a hit they are willing to take on the returns—and whether in altering their policies will depress overall sales. (Having worked in retail as a kid, I know that those returns took a healthy bite out of my commissions.)
What does this mean for the toy industry? Obviously, we’re not completely sure, but what we can expect are restocking fees to consumers (even if the toy gets tossed), which can be 10-15 percent of the purchase or a flat fee, depending on the retailer. It also means that buying things to “try them out” and return if they’re not right may be a bit more costly. And policies may change so that some things may not be able to be returned at all.
Any unrecouped costs related to these efforts are likely to be passed on to manufacturers. (Who are we kidding? They will be passed on to manufacturers.) As margins get tighter, retailers are going to want to make up revenue anywhere they can. It’s a new way of doing business.
Think of it like baggage fees on airlines. Of course, when baggage fees first started showing up, people were up in arms about them. Now, they’re just part of the whole travel experience. Also look for retailers to give preferential treatment to their best customers, just as airlines waive baggage fees for their flight program members. (Some Amazon fees are already waived for Prime customers.)
The good news for the toy industry is that compared to apparel or shoes where people like to over order and try at home, the volume of toy returns is lower than in other categories, according to retailers we contacted.
We suspect that one of the reasons for this is that unlike a pair of shoes that doesn’t fit or a dress that isn’t quite right, toys are often bought at the request of a child, and if the kid is disappointed, well, adult purchasers just shrug it off rather than return it. It’s not the toy’s fault.
That’s the good news in all of this. Even as analysts are suggesting that the increased return fees may decrease overall sales volume, our industry may be less impacted. Let’s hope.
What do you think?
