Retailers are preparing for a spike in holiday returns following a record-breaking Cyber 5, from Thanksgiving through Cyber Monday. Software vendor Salesforce predicts a “returns tsunami” for the second year in a row as consumers are choosier about what to keep from their holiday shopping sprees. The firm’s predictions are based on analysis of activity from 1.5 billion consumers in 64 countries.

Holiday returns predictions

Salesforce says the rate of online purchases that were returned doubled the week following Cyber 5 and has remained high ever since. The software company and data vendor predicts more than $131 billion in holiday purchases will be returned.

That figure encompasses returns of purchases made globally in November and December 2023. It is based on returns patterns in dollars and percentages from the 2022 holidays and the rest of 2023, Salesforce says. 

Return rates will likely rise as high as 20% for a few weeks after the holidays into 2024 as people return gifts, says Rob Garf, vice president and general manager of retail and consumer goods at Salesforce. “After several years of spikes in holiday returns, we anticipate a slight increase from last year,” he says. In 2022, global returns grew to 13% of total orders in the holiday period, an increase of 63% year over year, according to Salesforce data.

Retailers largely corrected more generous return policies after the large increase last year to preserve profit margins, says Garf. “That said, we see retailers oversteering and negatively impacting customer service and experience. The returns experience must be easy, clear, and reasonable, or retailers risk brand loyalty and repeat purchases.” He adds that a positive return process can be the first step in a new shopping process for a consumer. Meanwhile, a poor experience can make it the last time a consumer interacts with the retailer. 

Reports of holiday returns so far

Online retailers report a mixed bag on returns as of the week before Christmas. Direct-to-consumer children’s apparel manufacturer PatPat’s returns as of the week before Christmas are comparable to last year at the same time, says head of marketing Ranu Coleman. They’re on track with PatPat’s expectations, and the retailer expects an “influx” in early January, after the holiday season. 

Meanwhile, women’s apparel retailer J.Jill is experiencing elevated return rates, CEO Claire Spofford told investors on Dec. 5. “The customer has become more discerning with their spending, particularly in certain categories,” Spofford said to explain the higher return rates. J.Jill implemented an updated fit guide to help customers find the right size before purchasing and alleviate some of the return pressure, the retailer said. 

Denim brand Pistola also reports higher than usual returns, the brand told Business of Fashion. The retailer is making real-time adjustments to the design of products with high returns, with the expectation that this year’s holiday returns could be 10% higher than in 2022.

David Sobie, CEO of reverse logistics vendor Happy Returns, says he expects return volume to break new records this season. “In an environment where people feel less confident in the economy, I think they’re just scrutinizing more what they keep,” he says of the reasons consumers appear to be returning a higher proportion of purchases this year.

Sobie says Happy Returns sees the number of returns peak at two times around the holidays. Once following the Cyber 5 period from Thanksgiving to Cyber 5, followed by a lull, then again about a week after Christmas. In 2022, the returns peaked over the six days after Christmas, reaching a high of 16%, according to Salesforce.

Impact of returns

Returns can be a costly problem for retailers. Companies pay an average of $26.50 to process $100 in returned merchandise, The Wall Street Journal reported in May. In 2022, about 16.5% of retail purchases were returned, totaling about $816 billion, according to the National Retail Federation. 

Rates are even higher for apparel, averaging 24.4% between April 2022 and March 2023, according to Coresight Research. That translates to about $38 billion in returned apparel in 2023, or the equivalent of all U.S. Cyber 5 spending this year.

The cost of processing a return of a specific item varies based on several factors, according to reverse logistics firm Optoro. For example, some apparel pieces may be out of style or out of season by the time the return is processed and cannot be sold for full price. 

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