Why companies like Amazon, Walmart, and Target will let you keep some products you want to return but issue you a refund anyway

• Major retailers are offering a surprising new option to customers for some returns: just keep it.
• That's because it doesn't always make financial sense for large retailers to process the return.

Picture this: you order a sweater online, it arrives at your house, and it's not the color you ordered. You go to return it and the retailer surprises you by saying, "we'll refund you, but don't bother sending it back."

If this phenomenon has happened to you at some point in the past few years, you're not alone: some of America's largest retailers have started issuing refunds while telling customers to keep or donate the unwanted goods.

Walmart, Target, and Amazon have started offering so-called returnless refunds on certain items, but we're not talking about free TVs and computers — the policy is applied in situations where the product is unlikely to be resold and where the cost of processing the return is equal to or greater than the cost of the product itself. It's intended for lower-cost items, and reserved for customers with purchase history at a given retailer.

It's a relatively recent trend in retail, and one that accelerated with the onset of the pandemic, when retailers were navigating a surge in online shopping, according to Nathan Smith, senior vice president of products at Appriss Retail, a retail software firm.

"There's a customer service angle and there's an economics angle," Smith told Insider. "It's outbound cost for the retailer on shipping and handling and putting that stuff back into the warehouse. But there's also the intangible cost as well: If it's a non-fault return from the consumer's perspective, you are adding to the consumer's dissatisfaction and therefore the likelihood that they may not shop with you again."

Smith added that shoppers are becoming more focused on sustainability as well and therefore more hesitant to increase their carbon footprint by shipping something back.

Walmart previously told The Wall Street Journal that a variety of factors determine whether a customer will be allowed to keep the product, including the value of the product, the cost of processing the return, and a customer's purchase history — it's the latter factor that Smith said should make retailers cautious, as certain customers might abuse these types of policies.

"It's one of those areas where consumers almost feel like it's victimless fraud," he said.

Still, as retailers get hit with a post-holiday "returns tsunami," returnless refunds may become more widespread. Salesforce recently predicted that more than 1.4 billion, or 13%, of holiday orders will get returned this year, up 57% from last holiday season.

And that tsunami is hitting when retailers were already dealing with bloated inventory levels and when the cost of shipping something to and from a customer is high. Smith estimated it costs a retailer about $10 in each direction; others estimate a return alone can cost the retailer as much as $30. So it's not much of a surprise that major retailers are reconsidering that expense.

Also unsurprising: Customers enjoy keeping items they didn't have to pay for.

One woman in Philadelphia told the Journal in 2021 that she attempted to return a too-small cat harness to Chewy, which told her to donate the harness instead of sending it back — and replaced it with one in the correct size.

"I love that," she said.

Ben Gilbert contributed to an earlier version of this article.