Even as some consumers were still shopping for gifts this holiday season, others were already sending things back to retailers. But returns are just getting started.
Total U.S. holiday-related retail returns are expected to jump 10% year over year, to total $90 billion worth of merchandise, according to data from Optoro Inc., a technology company that works with retailers to process returns. That amount is roughly equal to the gross domestic product of the Slovak Republic.
Returns to online retailers alone could reach $32 billion, up about 14% from about $28 billion last year, according to commercial real estate and investment firm CBRE.
If this holiday season plays out as expected, the flow of packages back to retailers has just begun. Optoro says 40% of consumers return holiday gifts between Dec. 26 and New Year’s Eve, 51% return them during January and 9% do their returns after January.
On Jan. 3, UPS Inc. expects a record-setting 1.4 million packages to be sent back to retailers. That would be an 8% jump compared with the busiest day for returns the previous year. UPS also reports that shoppers returned more than 1 million packages to retailers every day in December through Dec. 27.
What are consumers sending back? Among those who returned items to retailers this holiday season, 75% returned clothing and accessories (mostly returned for size), Optoro says, while 21% returned shoes, 20% returned electronics and 31% returned other items.
Tobin Moore, CEO and co-founder of Optoro, says three factors are driving an increase in goods returned to e-retailers and other merchants. First is that retail sales are increasing and, as sales grow the volume of returns will grow as well. Second is the growth of e-commerce. E-Commerce return rates can often be two to three times those of store purchases because consumers are buying without first seeing or trying on items. Lastly, Moore says, return policies are becoming more flexible.
“Because consumers demand more flexible return policies, retailers see policies like free return shipping or longer return windows as a necessary part of customer experience,” Moore says. “As a result, retailers must put smarter systems in place to manage and resell the increased number of returns that come as part of a better customer experience.”
According an Optoro survey of 1,000 U.S. consumers conducted in October:
- 42% of shoppers look at a retailer’s return policy before buying a gift.
- 71% of consumers say a positive return experience greatly encourages them to shop with a merchant again.
- 38% feel disappointed or cheated when they receive store credit for a return.
- Only 11% of consumers like getting store credit rather than a full refund.
- 46% percent of shoppers abandoned an online shopping cart in the past year because the retailer didn’t offer free shipping on returns.
Optoro’s observations are reinforced by other research. A recent survey of 4,722 online buyers in the U.S. and Canada by customer feedback provider Bizrate Insights found 77% of consumers would be less likely to recommend a retailer that takes too long to issue credit for returned items.
When asked what course of action they would take in response to slow returns processing by a retailer, 40% respondents in the Bizrate survey said they would stop shopping online with that retailer and 40% said they would limit their shopping with the retailer. Only 11% of the respondents said it wouldn’t affect their likelihood to shop again.
In the Bizrate survey 72% of consumers say they’d be willing to wait five days to receive a credit once the retailer had received their returned merchandise; 24% of consumers say they’d wait 10 days; 3% say 20 days; and 1% say they’d wait longer than 20 days.
In a survey of 5,000 online shoppers released by UPS in June 2017, 79% say free shipping on returns is an important factor when selecting an online retailer to buy from (up two percentage points from 2016).
Among those responding to the demand for easy returns is Wal-Mart Stores Inc., No. 3 in the Internet Retailer 2017 Top 500, which last fall simplified the return process through its smartphone app in time for the holiday season. As of early November, shoppers are able to initiate the return of items bought online via the retailer’s app before going to the store. Once there, they move through a dedicated express lane to scan the products and hand them over.
Walmart also has introduced Mobile Express Returns kiosks in its stores. Walmart says customers using the kiosks can complete returns in less than five minutes and receive a refund in about a day.
Meanwhile, Amazon.com Inc. (No. 1) recently began letting customers return products at some Kohl’s Corp. (No. 18) locations. Amazon customers also can now return packages to Amazon-owned Whole Foods stores.
“Retailers are moving from an ‘avoid and prevent’ to an ’embrace and solve’ approach to retail returns,” Optoro’s Moore says. “It’s true that some retailers are taking steps to prevent returns with better online descriptions, images and sizing guidelines. However, by and large, retailers have shifted from writing returns off as a necessary cost of doing business and have moved to investing in optimizing the returns process from a customer experience and logistical perspective.”
However, “embrace and solve” is not always easy to implement., Moore says.
“Retailers that sell both online and in brick-and-mortar stores face a complex logistical minefield when it comes to returns. Often times, retailers don’t stock the same inventory online as they do in stores,” Moore says. “Because many now accept e-commerce returns in their physical stores, managing that returned inventory often requires more sophisticated systems to minimize costs and optimize recovery.”
But the impact of returns is not all bad news for retailers.
Optoro says, 91% of gift returns this holiday season happened in stores. Among those returning a gift that way, 54% made an additional purchase when returning an item, 44% ate out; 42% shopped at multiple stores and 30% redeemed a gift card, according to Optoro.Favorite