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 occasionally offer a surprising option to customers for some returns: just keep it.
• In some cases, it doesn't make financial sense to process the return, especially for small purchases.
• Walmart, Target, and Amazon are some of the major brands that offer so-called returnless refunds.

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 something like, "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 are among the companies who occasionally offer so-called returnless refunds on certain items for some customers. Each confirmed to Business Insider that a small number of orders are refunded without a return, though none agreed to reveal specific dollar amounts or other parameters.

In other words, the practice won't lead to free TVs and computers — it's intended for situations where the retailer is unlikely to resell the item and where the cost of processing the return is equal to or greater than the cost of the product itself.

Think lower-cost items, and typically for customers with purchase history at a given retailer.

The trend is a few years old now, having been accelerated with the onset of the pandemic, when retailers were navigating a surge in online shopping, according to Nathan Smith, who previously served as 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 Business 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.

Retailers have taken steps to make it easier for customers to return online orders, from dropping off Amazon packages to Whole Foods or Kohl's, to Target's recent drive-up returns option, thereby reducing the expense of the process.

Walmart previously told The Wall Street Journal it considers a variety of factors to 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.

Certain customers might abuse these types of policies, Smith said. "It's one of those areas where consumers almost feel like it's victimless fraud."

Amazon also said it monitors for possible cases of fraud and will flag accounts with excessive returns.

"As a whole, the industry is prioritizing efforts to reduce the amount of merchandise returned in stores and online," NRF Executive Director of Research Mark Mathews said in a statement.

Still, a post-holiday "returns tsunami" could cause an uptick in returnless refunds, as the National Retail Federation etimates $148 billion of online and in-store holiday purchases make their way back to retailers.

The NRF also said shoppers returned $247 billion worth of e-commerce purchases last year, of which nearly 11% were expected to be fraudulent.

While Smith estimates it costs a retailer about $10 in each direction, others figure 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 (or donating) 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.

Avery Hartmans and Ben Gilbert contributed to earlier versions of this article.