Retail Returns Add Up to an $890B Problem in 2024: Can Consumer Behaviors Be Altered?

Although holiday shopping records are set to be broken as 2024 draws to a close, as CNBC indicated, there remains one serious problem with selling such a large volume of products to today's consumers: the prevalence of returns.

According to a recent report by the National Retail Federation (NRF) and management company Happy Returns, returns are expected to amount to 16.9% of all merchandise sales for retailers this year. This cost is estimated to come in at $890 billion in total expenses.

The Problem of Excessive Returns Seems To Be Expanding in Scope

Returns have always been a concern in the retail space, as they represent not only a lost sale but also several other associated costs: restocking fees, a loss of the merchandise altogether if it is not sellable, and perhaps even a disgruntled or lost customer if the process doesn't go smoothly.

In the pre-pandemic era (2019), however, the annual return rate rested at 8.1%. In 2020, as COVID-19 sparked a change in how consumers choose to shop, the annual return rate hiked upward to 10.6% — then, in 2021, it skyrocketed to 16.6%, nearly doubling over the course of just two years. In the interim, little has changed, suggesting that the contemporary U.S. consumer has become acclimated to easy, hassle-free returns.

In turn, the ease of said returns, and the lack of restrictions placed on those consumers who engage in morally dubious buy-and-return habits, has enabled several problematic behaviors.

Bracketing, Wardrobing, and Other Consumer Buying Practices

According to research from Happy Returns, nearly two-thirds of all buyers are now buying multiple sizes or colors of items so that they can return the items that don't suit them best. This practice is known as bracketing, or buying adjacent styles or sizes as something of a "safety measure," but it is ultimately destructive to a company's bottom line in terms of shipping and processing costs.

A majority of contemporary consumers (69%), also engage in the practice of wardrobing, according to a recent report from returns solution company Optoro. This is something of an age-old practice and happens when a customer buys an item for a single event and returns it immediately afterward. From formalwear to something to don for a date, it's all too easy to buy something for one outing or event and then quickly return the entire outfit after the fact.

Both of these behaviors are spurring a massive increase in overall retail returns. Per Optoro, nearly half (46%) of all consumers are returning items multiple times per month, which represents a 29% increase from just last year.

CNBC quoted David Sobie, Happy Returns’ co-founder and CEO, on the subject.

“With behaviors like bracketing and rising return rates putting strain on traditional systems, retailers need to rethink reverse logistics,” Sobie said.

Furthermore, reckless returns also pose environmental concerns. Increased carbon emissions from excessive shipping, refurbishing, cleaning, and restocking represents one issue, but simple wastage — products being sent to landfills if they are not recoupable — is also worth considering. As Optoro indicated, returns in 2023 accounted for 8.4 billion pounds of landfill waste.

If Consumers Are Taking Advantage of Overly Generous Return Policies, Will Restrictions Actually Help?

There's a fine balance to be struck between attempting to reduce returns (and stymie trending behaviors such as wardrobing and bracketing) and irritating customers.

NRF data indicated that retailers at large had endured enough on the returns side, with 66% of sellers indicating that they had started charging for at least one return method over the past 12 months. Some primary reasons given? The cost of operations to process returns has increased (44%), shoppers were becoming more tolerant of return processing fees (40%), and retailers wanted to mitigate return fraud (39%).

Gen Z appeared to be leading the way in terms of engaging in unethical consumer behavior, with those polled in that generation admitting to returning an item that had the tags removed (60%), returning an item outside of the return window (46%), returning a worn item (50%), and returning a different item than the one indicated entirely (41%) in much greater proportion than older peers over the past 12 months.

While NRF survey data indicated that charging for at least one return method had created mixed results — lower sales and a decrease in average order value were set against a reduction in return rates and recouped revenue from return fees — it seems that retailers are poised to offer more of the same in 2025.

Retailers can expect to further streamline shipping and returns operations while also launching an appeal to buyers to avoid negative purchase practices such as bracketing, wardrobing, and worse.

"Improving this experience means balancing a number of factors: Fully understanding customer expectations; effectively and efficiently managing logistics costs and inventory; creatively preparing for seasons likely to bring a spike in returns such as the winter holidays; setting and communicating clear returns policies that combat retail fraud and abuse while providing flexibility and convenience for shoppers; exploring emerging technology for returns automation, analytics and reporting; and helping consumers understand the impact of behaviors such as wardrobing and bracketing," the NRF concluded.