The Lowdown
- The 2021 holiday shopping season saw a whopping $761 billion worth of merchandise set to return, making up 16.6% of total U.S. retail sales that hit $4.58 trillion last year, as projected by the National Retail Federation (NRF) and Appriss Retail. Compared to the 10.6% return rate in 2020, it's a noticeable jump. Out of the $1.05 trillion in online sales last year, shoppers returned around $218 billion, with a whopping $23.2 billion being fraudulent returns.
- Sabotaging the joy of finding that perfect gift, popular categories with the highest return rates include clothing (12.2%), and home improvement and home goods (both 11.5%). Credit cards, cash, and debit cards dominated as the most common original payment methods leading to returns.
Insightful Aside:
Anticipated Returns from 2021 Could Reach $761 Billion: NRF (National Retail Federation)
Before the NRF's report, other research predicted a tidal wave of holiday returns. CBRE and Optoro in December estimated that shoppers would return at least $66.7 billion in holiday merchandise to retailers. A RetailMeNot survey late last year found that 38% of respondents anticipated returning gifts in 2022.
"With total retail sales accelerating due to sustained consumer demand during the pandemic, it's no surprise that the overall rate of returns has also been impacted," Mark Mathews, NRF's VP of research development and industry analysis, said. "While retailers see an increase in items returned to stores and online, it also provides them with additional opportunities to connect further with customers and provide a positive experience."
The estimated rise in returns brings added work and costs for logistics companies and higher costs for retailers. The cost of returns has increased since 2020, with electronics like laptops, tablets, and cell phones having the highest reverse logistics cost per item. Earlier this month, UPS expects to manage more than 60 million return packages from Nov. 14 through Jan. 22, a 10% jump from last year and an all-time high.
For many retailers, an influx of returns means liquidating or discarding returned merchandise, contributing to more junk in landfills and costing retailers merchandise.
Enrichment Data:As e-commerce grows, so does the significance of holiday returns. In 2024, holiday returns spiked 17% higher than the yearly average, with apparel having a return rate of 12.2%. The online apparel return rate in the U.S. reached 24.4% in 2023. Younger consumers, like Gen Z, engage in bracketing for apparel purchases, which escalates return volumes over the holiday season.
Costs rise due to the complexity of reselling or restocking apparel and footwear given their high return rates. Auto parts returns are also expensive, with a high return rate of 19.4%. Retailers are adapting to reduce return rates and costs by improving sizing guides, offering virtual try-ons, and optimizing return policies.
- Amidst the surging e-commerce industry during the pandemic, the significance of holiday returns has grown, with the return rate of online apparel in the U.S. reaching 24.4% in 2023.
- In the realm of research, predictions have pointed towards a rise in holiday returns, with estimates suggesting that shoppers will return at least $66.7 billion in holiday merchandise to retailers in 2021.
- To counter the increasing costs associated with returns and reverse logistics, many retailers are implementing strategies such as improving sizing guides, offering virtual try-ons, and optimizing return policies, particularly in high-return categories like clothing and footwear.
){kind=link}