There’s good news and bad news for online retailers this year.
The good is consumers are expected to spend almost $241 billion on eCommerce purchases during the holiday season, the Financial Times (FT) reported Thursday (Dec. 26), citing data from Adobe Analytics.
The bad news? It’s easy for consumers to return the items they purchase, something that has become — in the words of FT opinion writer Pan Kwan Yuk — “a multibillion-dollar problem for the retail industry.”
Online purchases have for years had higher rates of return than brick-and-mortar purchases, as consumers who can’t see or try on an item before buying are more likely to have a change of heart, according to the report.
Consumers in the United States returned 17.3% of their online purchases in 2023, versus 10% for in-store items, the report said, citing National Retail Federation (NRF) figures. Returns made up $743 billion, or 14.5%, of the $5.13 trillion of retail sales reported last year, compared to 8.8% in 2012.
“For retailers that have seen their margins eroded by the continuing arms race in free shipping, being on the hook to foot the bill for processing the mountain of unwanted, used or damaged goods only compounds their pain,” Yuk wrote. “A returned item may no longer be sellable by the time a customer returns it. This means the item ends up in the discount bin, hurting profits. All this makes returns unpredictable and hard to account for on a company’s balance sheet.”
This is particularly true for apparel, as shoppers tend to order an item in different colors and sizes before returning the ones they don’t like. For some online clothing sellers, returns now average roughly 40% of sales, Yuk wrote.
The report followed news from earlier this week that the NRF expects this year’s holiday season return rate to be 17% higher than usual. January typically sees the most returns — to the point that experts have dubbed the period “Returnuary.”
“Returns are part of any retailer’s relationship with customers — and buyer’s remorse can translate into a sticky customer relationship if returns and refunds are handled adroitly,” PYMNTS wrote earlier this month.
The PYMNTS Intelligence report “2024 Global Digital Shopping Index: SMB Edition,” commissioned by Visa Acceptance Solutions, found that merchants who expect an increase in revenue are 31% likelier to offer online returns than those who anticipate no revenue change.
Intel’s new CEO, Lip-Bu Tan, is clear-eyed about the chipmaker’s many problems and the tough road ahead as he engineers a turnaround to revive this legendary Silicon Valley company.
“This is an iconic and essential company that is important for the industry and also to the United States,” Tan said in a keynote address at Intel’s conference in Las Vegas this week.
The nuclear physicist, who dropped out of the Ph.D. program at MIT, is best known for transforming Cadence Design Systems into a robust chip design and software company. He was also a board member at Intel.
“We fell behind on innovation. We have been too slow to adapt to meet your needs. You deserve better, and we need to improve, and we will,” Tan told his audience of customers and vendors. “Please be brutally honest with us.”
Tan called this juncture a “defining moment” for the legendary chipmaker.
Intel was once the world’s most valuable chipmaker — a crown that would go to Nvidia. With its “Intel Inside” branding, it was the first chipmaker to become a household name. In the 1990s, Intel and Windows became so dominant in PCs that the pair were called “Wintel.” Intel founder Gordon Moore’s “Moore’s Law” still stands 60 years after it was created.
Intel’s troubles began in the mid-2010s, when it started missing key product deadlines and struggled to advance to 10nm manufacturing, allowing rivals like TSMC and AMD to overtake it in performance and efficiency. Once the industry leader, Intel became hampered by internal bureaucracy, a rigid culture, and a hardware-first mindset that lagged behind a software- and artificial intelligence (AI)-driven future, while competitors like ARM and Nvidia thrived.
Intel also famously turned down Apple’s request to make chips for the iPhone, paving the way for Qualcomm. In the third quarter of 2024, Intel posted its largest quarterly loss of $16.6 billion, including a $15.9 billion charge to reflect lower valuations and costs to lay off 15,000 employees.
Now there are even reports of Intel as a takeover target — humiliating for a tech icon. “Intel Corp.’s fall from market dominance to takeover target is a tale marked by missed opportunities and rising expenses,” wrote Iuri Struta, senior research associate at S&P Global Market Intelligence, in a blog post. In 2020, Intel was the second most valuable chipmaker. As of last September, it had fallen to 14th place, he said.
Tan understands the enormity of his task to turn around Intel. “We have a lot of hard work ahead. We have fallen short of your expectations. I will pull together strong teams to correct the past mistakes and start to earn your trust,” he said. “I will not be satisfied until we delight all of you.”
Read more: Intel Faces Potential Breakup as Broadcom and TSMC Explore Deals
Tan faces a big challenge in reviving a company with decades of inertia to lead in a market that now moves at hyperspeed. His four areas of focus are: changing the culture, strengthening the core business, incubating and growing new business, and building customer trust.
Tan said he will bring Intel back to its roots: an engineering-focused company. He promised to meet with engineers even six to seven levels down from the C-suite to hear their ideas and unleash their creativity. Tan also promised to retain and attract key talent, which had been leaving Intel.
Tan said Intel needs to adopt a startup culture to innovate, where every day is Day One. His weekends are filled with meetings with engineers and software architects who have “brilliant” ideas and who “want to change the world. That’s when I get excited to work closely with them,” Tan said.
Tan also plans to simplify the way Intel works because “bureaucracy kills innovation.” The startup mindset will enable them to act with speed.
“We are operating in a very dynamic, fast-moving industry. Technology adoptions and disruption are accelerating faster than ever. This is being driven by the one transformational force called AI,” Tan said.
Intel will target three AI areas: cloud AI, generative and agentic AI, and physical AI such as robotics. To that end, Tan said Intel will spin off non-core business divisions but did not name which ones.
To right its operations, Tan said Intel must change the way it makes products. The company used to start by making hardware — chips — and then developing the software to make it work. “The world has changed. You have to flip that around,” Tan said. “You start with the problem, what you’re trying to solve. … Then we work backwards from there.”
Tan also addressed Intel’s product and foundry priorities. In client computing, he reaffirmed a commitment to innovation, noting the competitive landscape has shifted and Intel must not “stand still.” Pushing forward with AI-enhanced PCs, the company aims to ship its next-generation Panther Lake processors on its 18A process node later this year.
Perhaps most critically, Tan confirmed Intel’s ambitions to manufacture chips for customers around the world. “Foundry is a service business that is built on the foundational principle of trust,” he said.
At this stage in his career, Tan said he has been asked why he would take on one of the most difficult jobs in tech.
“The answer is very simple. I love this company,” Tan said, with tears in his eyes. “It was very hard for me to watch it struggle. I simply cannot stay on the sidelines knowing that I could help turn things around.”
Photo: Intel CEO Lip-Bu Tan. Credit: Intel livestream
