Are retailers’ returns concerns coming to a holiday head?
As is the custom, consumers are sending back their unwanted holiday gifts, but this year’s returns problem is proving to be bigger — and more expensive — than usual.
One in four U.S. customers will return a holiday gift by next weekend, according to projections from a study conducted by UPS and reported by Bloomberg. That number represents a 10 percent increase over 2020’s return-heavy season.
The costs that retailers incurred when accepting returns spiked in 2021, rising 59 percent, according to the study. It now costs $33 dollars for a retailer to process the return of a $50 item. The increase can be attributed in part to broader economic trends such as labor shortages and rising logistics costs. Returns have grown so voluminous that retailers have moved to a model of liquidating returns via online auction because it is impossible to sort through them all and determine what is suitable to restock. Some returned inventory ends up getting incinerated or thrown into landfills.
While it is well-established that e-commerce has led to increased returns due to the tendency of customers to use free return policies when comparison shopping, especially in apparel, a recent survey shows some surprising reasons that customers could be returning so much this year.
A study shared with RetailWire by Voxware indicated that in the aftermath of the 2021 holiday season, 26 percent of customers returned products that were delivered late, up from 10 percent in 2018. Retailers may also be adding to the problem, as the study found that 51 percent of customers who returned an item received a wrong item, again, as a replacement, which would presumably lead to another return. Fast and convenient returns are a perk consumers continue to expect, with 97 percent saying that how a retailer handles a return will impact their choice to shop in the future.
How retailers can keep customers happy while not losing money has become a perennial question. Some retailers have tried charging a fee for returns after a certain period, only allowing returns in exchange for store credit and tying free returns to tiered loyalty programs.
- Holiday Gift Returns Are Choking Retailers and Landfills – Bloomberg
- Should retailers be looking to leverage free return shipping? – RetailWire
DISCUSSION QUESTIONS: How can retailers reduce the number of returns they receive or at least the cost associated with them? Can retailers cut return costs without creating disgruntled customers in the process?