The case for and against ‘keep it’ return policies

“For us, having that totally taken out of operations actually let us scale quicker and get more positive feedback from the consumer,” Bitton said.

At a moment when companies are closely eyeing cost drivers, some brands are forgoing the complex reverse logistics process altogether. For some, like O Positive, it’s more cost-efficient to let the customer keep the item rather than reprocess an opened item. Retail giants like Amazon, Walmart and Target are also known for offering “returnless refunds,” at times, where people don’t have to ship the items back — which is most common in cases where something arrives damaged or broken.

From a customer experience standpoint, not having to return an item and still getting a refund on it can be a big win. The topic shows up occasionally on Reddit forums like r/UnethicalLifeProTips and r/AmazonPrime. But an October survey from the National Retail Federation and Happy Returns found that an estimated 9% of all returns are fraudulent — and companies may be wary to open the door to giving out unnecessary refunds.

Juan Pellerano-Rendón, CMO at e-commerce operations platform Swap, said brands and retailers have been experimenting with different return policies since the “era of free-flying e-commerce,” during the Covid-19 pandemic. At that time, customers became accustomed to free shipping and returns, as companies sought to drive sales while consumers had limited in-store access. But this created an expectation that isn’t sustainable for many brands in a more crowded, inflation-riddled landscape.

“There’s no meaningful way to grow your business if you’re constantly refunding people for one-off items,” he said. “You’re putting a positive reinforcement on bad behavior.”

Still, as customers are reluctant to pay for returns and processing opened items can be a hassle, many brands are choosing to say “keep it” and refund their customers.

Here’s a breakdown of the pros and cons of “returnless refunds.”

For: Avoid complex return logistics operations and expenses

Like O Positiv, the personal care brand Tubby Todd Bath Co. doesn’t require customers to send in products after requesting a return. Rather, it tells customers to give the item away if it didn’t work for them. The company started as a DTC business in 2013 and specializes in bath and body products for kids with sensitive skin or conditions like eczema.

Co-founder Brian Williams said the purpose is twofold: Not only does it spare a family the chore of printing out a mailing label and heading to the post office, but it also means the company doesn’t have to process opened items.

“We didn’t want this to be a burden to somebody’s family that had invested a lot of money into our products, and it didn’t work out. So instead of sending the product back, we say, Give it to another family that might need it,'” he said. “Plus, logistically, it’s a lot of work. What are we going to do with an open lotion?”

There is one exception: If a customer requests a return due to a quality control issue, the customer will be asked to send it back for further inspection and testing.

At O Positiv, Bitton said the company has a return rate of under 2% and can absorb the cost of refunding products it won’t get back instead of trying to repackage them. “You have to have a longer vision on that dollar,” he said. “Reselling it is just short-term math instead of long-term math.”

Against: Not a fit for all categories

Brands focused on consumables and beauty products may find it easier to not have to re-process returned items, said Bitton from O Positiv. But that’s not the case for higher-margin items, or ones that could be resold.

“For us, you can’t put pills back in a bottle,” he said. “This doesn’t work for apparel because they can resell it.”

Companies that do require people to send back their returns are becoming more creative with how they deal with the stock. Some brands — most recently, Rhone — are building out new sections of their websites specifically to sell returned items. From a platform perspective, marketplaces like Rebel specifically sell open-box or returned items.

Pellerano-Rendón from Swap said returnless refunds from big-box retailers are most commonly seen on low-value, low-margin items that aren’t worth the cost of shipping back. But it’s also more common with anything perishable. “These are things that require a certain level of consumer safety, so I think that’s something you’ll continue to see.”

He also said that he anticipates seeing more brands offer multiple options for returns — like keeping an item to receive store credit, versus a full refund.

For: An easier, friendlier customer experience

For all the logistical upside, though, DTC brands that let people keep their returns also see an upside in customer satisfaction. The NRF and Happy Returns survey found that 71% of customers said a poor returns experience will make them less likely to shop with a retailer. More pointedly, about 57% of shoppers will not shop with a retailer after being charged for a return, the survey found, up 40% from the year prior.

Tubby Todd, which has reached over 2 million customers and recently launched in Target, has an average return rate of 1.5% of gross sales. Williams from Tubby Todd said the company aims for its policies to feel “generous” and would rather the product reach a potential new customer’s hands than sit unused.

“If it wasn’t a good fit for their family, no questions asked. Let’s go ahead and make sure that we’re taking care of them,” he said.

Bitton from O Positiv said that, in a “post-Amazon world,” people don’t want the hassle of paying to return a product, let alone shipping it back. “Even if that product didn’t work for them at that stage of life, I want them to leave with a really good feeling and come back in three months or three years to try something else.”

Against: Fraud and abuse potential

Williams said having a “keep it” return policy can be a bit scary. “You’re putting a lot of trust in the customer to not take advantage of the brand,” he said.

But Tubby Todd has yet to pull back on the policy, and has even experimented with similar models for gifting and marketing campaigns. One recent campaign asked customers whether they wanted to send a free bottle of Tubby Todd to a friend and pay only shipping costs, knowing people could take advantage of it to send it to themselves. “It’s just a matter of being generous and getting the products in people’s hands,” he said.

Pellerano-Rendón from Swap said the returns area of the e-commerce business needs an education push, similar to when tariffs began to hit companies last year and they proactively explained to customers how their supply chains worked. If customers better understood why a company charged for returns or why it could only offer a partial refund, it could benefit the brand’s overall operational costs, he said.

“Brands need to take the onus on educating consumers,” he said. “I think you would see a fundamental shift in consumer behavior for the brands that go out on their front foot and explain it to consumers in a way they understand. Because returns really are something that can kill a business. And if you love that brand, you don’t want it to go away.”