Retail returns outpace online sales growth

After weeks of speculation and reports about what the post-holiday period known as “comeback season” might look like, we now have a number: $761 billion.

To borrow NASA parlance, “Houston, we have a problem.”

Read more: Why retailers should pay consumers to keep their holiday returns

See also: Retailers are testing discounts and no-return policies to keep goods with consumers

Although this figure published in a press release from the National Retail Federation (NRF) on Tuesday January 25 is an annual count, it is nevertheless surprising in its size and remarkable in its growth.

Consider this number for a moment. The value of all those returned sweaters, unwanted gadgets and ill-fitting pants is not only greater than the entire GDP of Switzerland, this pile of unwanted goods is also growing about five times faster than the increase of 11 % of online sales predicted by PYMNTS research for the end of the busy retail year.

According to the NRF’s survey of 57 retailers conducted between mid-October and mid-November, the total return rate jumped 6 percentage points in 2021, to 16.6% from 10.6% last year. last year. The leading retail industry trade group also reported that the 20.8% rate of online returns remained stable, although the dollar value of those sales and returns continued to grow.

“Retailers need to rethink returns as a key part of their business strategy,” said Steve Prebble, CEO of Appriss Retail, a California-based company specializing in data analytics and sales optimization. “Retail is facing an influx of returned items. Now is the time to stop viewing returns as a cost of doing business and start viewing them as a time to truly engage with your consumers.

Forward thinking on reverse logistics

While invisible online purchases have historically and predictably been higher than their in-store counterparts, the new findings paint a new picture of a problem that has truly become too big and expensive to ignore, as retail sales electronics represent an increasingly larger slice of the overall retail sales pie.

For example, according to data from the business group, returns from online sales not only accounted for $218 billion of the total $1 trillion returns problem, digital sales also resulted in a much higher processing cost as well as a significantly high percentage (10.6%) that were the result of many types of fraud. This included “wardrobe” – or wearing an item once and returning it – as well as the return without a receipt of stolen goods and employee theft or collusion.

In dollar terms, the NRF said that for every $1 billion in sales, the average retailer incurs $166 million in returned merchandise and loses $10.30 on every $100 of returned merchandise received, which is an increase around 17% from 2019 levels.

The silver lining

Certainly, retailers and the growing reverse logistics industry are aware of the problem and are working to find a way to slow it down, whether through the use of better digital pre-sale sizing tools, policy limitations free shipping/free returns that encourage redundant purchases, as well as improved reverse logistics planning systems that prepare returns in advance as soon as an item is sold.

“I don’t think distribution centers in general are even close to being prepared for the returns they are seeing and will continue to see,” Keith Phillips, CEO of Voxware, a provider of warehouse automation and products based in New Jersey. supply chain analysis, PYMNTS said in an interview earlier this month.

Read more: Retailers still nowhere near getting ready for peak return season

While few would dispute that claim, the industry has long feared doing anything that could disrupt the digital momentum that consumers increasingly prefer when shopping for everything from apples to outfits.

However, the NRF sees the issue of returns as something that co-exists with a sales opportunity, noting that – if handled well – returns can actually improve the customer experience and serve as a means of “selling to a customer”. known,” noting that for many retailers, “the best shoppers often make the most returns.”

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David A. Albanese