January 19, 2022
As is customary, consumers are returning their unwanted holiday gifts, but this year’s return problem is proving to be bigger and more costly than usual.
One in four U.S. customers will return a holiday gift by next weekend, according to projections from research conducted by UPS and reported by Bloomberg. This number represents a 10% increase over 2020 return-intensive season.
The costs incurred by retailers when accepting returns skyrocketed in 2021, increasing by 59%, according to the study. It now costs a retailer $33 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 become so large that retailers have moved to a model of selling returns through online auctions, as it is impossible to sort through them all and determine what to restock. Some returned inventory ends up being incinerated or dumped in landfills.
While it is well established that e-commerce has led to an increase in returns due to the tendency of customers to use free return policies when shopping for comparison, especially in clothing, a recent survey shows surprising reasons for which customers could return so much this year. .
A study shared with RetailWire by Voxware reported that in the aftermath of the 2021 holiday season, 26% of customers returned late-delivered products, up from 10% in 2018. Retailers may also be compounding the problem, as the study found that 51% of customers who returned an item received a wrong item, again, as a replacement, which would likely result in another return. Quick and convenient returns are a benefit consumers continue to expect, with 97% saying how a retailer handles a return will affect their choice to buy in the future.
How can retailers satisfy their customers without losing money? It has become a recurring 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.
DISCUSSION QUESTIONS: How can retailers reduce the number of returns they receive or at least the costs associated with them? Can retailers reduce return costs without creating unhappy customers in the process?
“The challenge for retailers is to get the right sale in the first place by offering the right product in the right sizes while helping customers with their online choices.”