Record breaking holidays mean flood of record returns for retailers

The first results are available and holiday retail sales were up 8.5% year-over-year from Nov. 1 to Dec. 24, according to Mastercard Spending Pulse. That’s low but still in line with the National Retail Federation’s (NRF) initial forecast of an 8.5% to 10.5% percent increase for the holidays, although it has since been even higher at 11. , 5%.

Accounting for non-auto retail consumer spending and all payment types, including cash and checks, Mastercard reports that sales grew 8.1% in-store and 11% in e-commerce.

But the biggest news is that e-commerce sales are up 61.4% from before the 2019 pandemic. This year, e-commerce accounted for more than 20% of consumers’ vacation spending, against 15% in 2019.

Exploring by retail category, Mastercard found that clothing stores grew the most with sales up almost 50% from the previous year. Jewelry stores saw sales increase by almost a third, and even department stores got a 21% boost.

“Consumers splurged throughout the season, with clothing and department stores experiencing strong growth as shoppers sought to put their best dressed foot forward,” commented Steve Sadove, Senior Advisor at Mastercard and former CEO and chairman of Saks.

But before retailers can take advantage of the windfall of exuberant consumer spending over the holidays, they’re going to have to deal with the inevitable consequence: returns. Last year, the NRF estimated that 13.3% of merchandise sold over the holiday season was returned, worth about $ 101 billion.

If returns continue to pace last year and retailers hit the NRF’s initial sales forecast of $ 843.3-859 billion, retailers can expect to receive between $ 112 billion and $ 114 billion. dollars in merchandise this year, including $ 43 billion to $ 45 billion in online sales.

However, in a survey of retailers, Inmar Intelligence found that 61% expect this year’s return rates to be even higher than last year.

And like everything else, these returns are going to cost retailers more. A report from CBRE-Optoro on Returns Logistics found that the cost of returns will increase by 7% this year when factoring in all processing, transportation, discount and clearance losses.

Nightmare after Christmas

Some retailers will be hit harder than others because returns are not distributed evenly among retailers. For example, online purchases are returned at a rate more than double that of in-store purchases. Returns can be as high as 40% for some retailers, suggested David Sobie, CEO of Happy Returns.

Happy Returns offers some 2,600 drop-off points where buyers can return their online purchases directly without having to print labels, packaging and shipping. And best of all, Happy Returns refunds immediately or makes an exchange. Happy Returns was recently acquired by PayPal

as a returns logistics arm, closing the loop of the 31 million companies for which it provides payment services.

Online fashion purchases are particularly vulnerable to returns. Bracketing, where customers buy multiple sizes to find the right size, is a common practice, with Navar research finding 58% of shoppers make it a habit. And even if they don’t regulate their purchases, fit, size or color are the main drivers of e-commerce returns, accounting for around 42% of them.

As mentioned, there is reason to believe that retailers will see an even higher rate of return this year than last year. First, consumers continue to go online for their holiday shopping, with more than half (52%) of shoppers surveyed by Navar saying they expected to buy more and less online in-store this year.

Second, buyers’ supply chain anxiety may have prompted them to make second or third choice purchases early, only to find the item they want later in the season, resulting in more returns. Or disappointed second and third choice gift recipients may decide to return unwanted items.

Needless to say, all of that returned merchandise will give a boost to service companies that help retailers liquidate excess inventory, like B-Stock Solutions, a B2B marketplace that allows retailers and brands to list, buy and sell surplus and returned goods.

“Last year we saw double-digit increases across the board as retailers look to optimize their inventory,” said Marcus Shen, COO of B-Stock.

“Having a generous and flexible returns policy is now part of the marketing strategy. A well-managed return policy helps convert visitors into buyers. As a result, the return rates are higher overall, which is obviously good for our business, ”he adds.

Many happy comebacks

While returns can be a nightmare for retailers, they are a necessary cost of doing business. And dealing with them wisely and efficiently from a customers’ perspective becomes even more important as more and more sales are made online.

“Consumers decide where to buy online based on the flexibility and ease of the returns process,” says Sucharita Kodali, vice president and senior analyst at Forrester.

. “It’s not something that retailers really like, but it’s now a cost to doing business, especially since so much of the sales for so many categories, clothing in particular, are in. line. “

Seeing returns as the next retail service differentiator, Forrester found that more than a third of American online consumers say fear of a complicated returns process has discouraged them from buying online.

“A tedious returns process alters the entire shopping experience, so in 2022 returns will become the hotspot of differentiation in retail. Return policies influence how consumers choose a retailer, ”says Kodali.

“Ease of returns means more places to return, quick refunds, return to a store, and having someone else wrap and return the package for you,” she adds.

Of course, the best way to deal with returns is to avoid them in the first place. That means better photography, more product details and posting customer reviews. In fashion, the stakes are even higher and require precise size charts and presenting a variety of models of different shapes and sizes.

Kodali concludes: “Smart retailers will follow

“Merchandising as a service offering” to better present products and avoid returns in the first place. “

About Timothy Cheatham

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