Uber’s Package Returns Service is ‘Coming When the Party’s Over’
Uber is getting in on retail package returns as the holiday season approaches.
The ride-hailing company said drivers will collect up to five prepaid sealed packages at a time, and drop them at a local post office or at UPS or FedEx stores.
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Consumers looking to return an item can select “Package” on the Uber app’s front screen, before clicking “Send a package” and typing in the receiving destination.
The service costs customers $5, and $3 for Uber One members. One logistics consultant isn’t sure people will be eager to use this option, however.
“I don’t know what makes Uber think that people are going be jumping to spend $5 or $3 to have the package returned when they expect the shipping to be free,” said Satish Jindel, president of ShipMatrix and SJ Consulting Group.
Jindel noted that most retail returns policies aren’t time-sensitive enough—there aren’t many retailers demanding customers return items within a 24-to-48-hour window—for consumers to want a speedier service.
The timing of Uber’s launch suggests that the ride-hailing giant wants to accommodate the usual online shopping rush and ensuing returns tsunami that hits retail every year. Even with a holiday that could see its lowest sales growth since 2018, according to Bain & Co., 3 percent sales growth would still result in more goods clogging the returns pipeline.
In its announcement, the tech company cited research from Happy Returns, indicating that 79 percent of shoppers under 30 see mail returns as “somewhat or very annoying.”
The National Retail Federation and Appriss Retail tallied retail returns as an $816.8 million problem in 2022, marking a 7.2 percent increase in returned goods from the year prior. The good news is that the returns rate didn’t rise, remaining flat at 16.5 percent, versus 16.6 percent in 2021.
But the launch comes as retailers are trying to curb returns volume by making it harder and more expensive to return items, which could in turn limit the service’s demand. According to a recent survey from Shippo, 72 percent of U.S. shoppers who have returned online purchases in the past 12 months said they noticed retailers making the experience harder over that time span.
“They’re starting to get control over the experience. What that means is the number of packages being sent back [is] going to be shrinking, not growing,” Jindel told Sourcing Journal. “For Uber to get into this market—they’re coming when the party’s over.”
While the program launches ahead of the holiday rush, retailers might not see a corresponding increase in returns right away.
“As the Uber service only ferries packages between people’s homes and a carrier like USPS or FedEx, it will make very little difference to retailers,” said Neil Saunders, managing director of research consultancy GlobalData Retail. “It may marginally increase the volume of returns as consumers find it more convenient, but in the grand scheme of things the difference will be small.”
Jindel noted that Uber might only make money on the service only during the holiday period, namely after Christmas.
“Most of it would be January. People hold on till after Christmas to decide what they want to return for maybe two weeks to a month,” Jindel said. “There are people who are lazy, they like playing with the apps and they’re not paying $5 out of their pocket, it shows up on their credit card.”
He suggested that launching the feature in January may have been a better way for Uber to cover the cost economics, instead of running the service all year year.
Although Uber reported its first-ever operating profit in August, Saunders doubts whether the service will contribute to the company’s bottom line going forward.
“For Uber, this is a way of generating some additional revenue,” Saunders said. “However, quite how profitable it is remains to be seen. Unless Uber is consolidating returns, the venture does not seem like it will be all that profitable.”
The San Francisco company said the service will be available in nearly 5,000 U.S. cities to start, including Boston, Chicago, Dallas, Denver, Los Angeles, San Francisco and Washington, D.C.
The feature builds on Uber Connect, a service that lets users send packages locally between family and friends. Customers can track their package in real time in the Uber app. The courier will send a visual confirmation or photo of the receipt when the drop-off is completed.
Packages sent via Uber must be valued at under $100 and weigh in at under 30 pounds.
