With presents unwrapped, now comes the least fun part: holiday shopping returns.
Consumers return more items during and after the holiday shopping season than at any other time of the year.
This year, shoppers are expected to return up to $95 billion worth of holiday purchases, a projected jump of 15% to 20% over last year, according to B-Stock Solutions. As much as half of that will come from online purchases.
Returns have always been a cost of doing business, but the rise in e-commerce has upped the ante for retailers.
Online returns cut more deeply into profit margins, when adding in the costs of shipping, restocking and potential discounts or write-offs if the items can’t be resold.
Just as consumers have come to expect convenience and choice in the way they shop online and in stores, they want an inexpensive and simple return process as well.
“The way retailers handle online returns for the holiday season is setting the stage for their customer engagement going into 2020,” said Andy Mantis, chief business officer of 1010data, which provides data and analytical intelligence to asset managers and the retail industry.
Return policies once were merely a necessary task of store operations. Now they’re becoming another competitive strategy for retailers to build brand loyalty, Mantis said.
Nearly 90% of consumers say they won’t buy again from brands after a bad returns experience, found a survey of 1,800 shoppers by Happy Returns, a technology and logistics company.
The “perfect return experience” overwhelmingly means free shipping back to the retailer, according to the company.
“It’s becoming more ingrained as a no cost, no downside feature for consumers,” said Mike Sansone, of the global consulting firm A.T. Kearney. “But at the same time, retailers are having increased costs as a result of that.”
A higher percentage of purchases bought online are returned, partly because shoppers can’t see and touch the items.
Apparel bought online gets returned twice as frequently as items purchased in-store, shows research by 1010data, based on credit and debit card transactions.
By 2020, annual costs to handle returns could reach $550 billion, a 75% increase from 2016, according to Statista.
Retailers with physical locations have an edge, especially when customers save them the shipping costs and bring merchandise purchased online back to the store.
That also gives retailers another chance to close the deal.
About 80% of shoppers prefer handling returns at the store, according to a survey released last week from the National Retail Federation, and nearly early three-quarters say they’re likely to buy something in the process.
Brick-and-mortar retailers are increasingly handling e-commerce sales that may have nothing to do with their own brands.
Kohl’s has been taking in Amazon returns and shipping them back for free since July 2019 at more than 1,000 of its stores. The Menomonee Falls, Wis-based chain credits the added store traffic with boosting sales.
In all, Amazon has 18,000 return points across the United States, including some 10,000 UPS stores and about 400 Whole Foods Markets, which it owns.
Nordstrom has established a handful of service hubs in which customers can return purchases from other stores and Nordstrom will take care of shipping it back.
UPS has formed a partnership with Michaels stores to allow customers to pick up or drop off prelabeled packages at various brick-and-mortar locations, including CVS and Advance Auto Parts stores.
FedEx allows customers to pick up and drop off packages at Walgreens.
To make returns easier, most retailers, including Minnesota-based Target Corp. and Best Buy Co. Inc., allow more leeway on returns made during November and December.
Target provides free shipping for online returns but also handles e-commerce returns at its stores, as does Best Buy.
Last week Amazon expanded its free return program to include “millions of items,” including electronics, kitchen appliances and household items that weigh under 50 pounds. Previously the company only allowed free returns on shoes, bedding and apparel.
Generous return policies come with a price, however.
Less than half of returns are resold at full price, reports Garner Research, which means retailers stand lose out on about 10% of sales over the holidays.
And then there’s the environmental cost of all that shrink wrap, padding and cardboard on top of the carbon emissions from trucks and planes that handle what’s known as the reverse logistics.
Amazon has introduced a label-free and box-free return program at 6,000 locations to try to address some of the waste it has created by raising customer expectations of speedy, no-cost-to-them delivery.
For now, retailers aren’t publicly discussing the threat of returns on profits, even as e-commerce has made returns a new battleground in the shopping experience.
Said A.T. Kearney’s Sansone: “Retailers more concerned with meeting the bar with service, so they don’t lose traffic.”