Merchants Prepare For $40B-Plus In Holiday Returns

Bigger sales mean more returns as retailers ready themselves for a flood of unwanted merchandise that is anticipated to top $40 billion, CNBC reported on Friday (Dec. 20).

A study by commercial realtor CBRE and returns specialists Optoro indicated that online sales in November and December would likely trigger record returns, more than the $37 billion that was forecasted last year.

The number of online returns is based on an anticipated return rate of 15-30 percent per shopper. Conversely, returns at physical stores are about 13 percent per shopper.

The study showed that eCommerce returns climb about 10 percent each year. Combined returns from online purchases and physical stores are expected to exceed $100 billion, up from $90 billion in 2018.

United Parcel Service (UPS) expects to return more than $1 million in merchandise daily, topping 1.9 million by Jan. 2.

Optoro told CNBC that merchants lose about $50 billion annually just due to the poor handling of returns.

“[The holidays] are a time when retailers are seeing all these sales and that does translate into rising profit margins,” Matt Walaszek, associate director of industrial and logistics research at CBRE, said. “However, the returns are quite costly. … The costs are the No. 1 stressor for the retailers.”

Optoro said that returned clothing loses 20-50 percent of its value in two to four months. Electronics drop 4-8 percent in value each month. The firm said that returns also generate roughly 5 billion pounds of waste in U.S. landfills each year.

“Customers have gotten really accustomed to free returns,” Walaszek said. “We are really spoiled. And retailers have to figure this out to be able to compete in this marketplace.”

The results of a new survey found that most people — around 77 percent — plan on returning some of their gifts this holiday season.

About 20 percent of those surveyed said they would probably return upwards of 50 percent of their presents. Of those returning gifts, 32 percent said they would use the mail, while 65 percent said they would return in-store.

The youngest generation, Gen Z, will return the most presents. In-store returns present a unique opportunity for retailers to either upsell or capture another sale while a consumer is in the store, aided by savvy store employees and retail technology.

National Returns Day typically happens in early January, with it representing the biggest increase in packages for the year. Consumers have traditionally waited until Christmas was over to start returning items in exchange for what they truly want.