Miami, Doral, IKEA exchange and return elevators.
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As people shop more online during the pandemic, they are also returning a large portion of clothing, shoes and other items to retailers.
According to survey results released Tuesday by the National Retail Federation and Appriss Retail, retailers expect to take back about 16.6% of all goods purchased by customers in 2021. That’s a leaps from the 10.6% average return in 2020.
According to the survey based on responses from 57 retailers between mid-October and mid-November, that number adds up to more than $761 billion in merchandise.
Profits tend to be higher when consumers buy online – a shopping method that makes it easy to throw items in a virtual basket, but hard to visualize how they will look or fit on people. According to the NRF, online sales account for about 23% of the $4.583 trillion in total US retail sales in 2021. Unsolicited purchases return to retailers’ stores and warehouses and become a headache for companies deciding whether they can resell those items, get wiped out by the manufacturer, or suffer a loss.
The average rate of return for online purchases is 20.8% – up from 18.1% last year, NRF found.
Mehmet Sekip Altug, an associate professor of business at George Mason University, said retailers tend to overlook what happened after the sale.
“As online sales go up, so does the return rate, and I don’t think it’s a secondary issue anymore,” he said.
He points to direct-to-consumer brands like Warby Parker that have opened stores that act as showrooms where people can see items in person instead of relying on the website’s images. Other retailers incentivize customers to return to shop online with a freebie – in hopes of enticing them to buy something else.
Holiday profits are also expected to move higher. On average, retailers expect 17.8% or $158 billion of merchandise sold in November and December to be returned, the survey found. Sale on holiday 14.1% increase over the previous year and hit a record $886.7 billion, according to the trade group.
Some categories drive more returns than others. Auto parts have the highest return rates, with an average of 19.4%, according to this year’s survey. It was followed by clothing with an average return of 12.2%, followed by homewares and home appliances which improved at an average of 11.5%.
For some retailers, the profit dilemma has inspired acquisitions and new approaches. Walmart bought virtual fitting room startup, Zeekit, for an undisclosed amount. Best buy There are online stores that sell appliances, TVs, and more with warranties. And several others, including Amazon, is offering refunds but requires consumers to keep some returned items, rather than deal with the hassle and cost of return shipping and handling a bulky, made-to-order item demand or low value.
Tony Sciarrotta, executive director of the Reverse Logistics Association, said customers expect retailers to have generous return policies, but those policies can cause shoppers to overorder, such as Buy a dress in a variety of colors and sizes. Along with cutting margins, he said, a large percentage of profits could triple for retailers as they work toward sustainability goals and try to keep items in stock within minutes. supply chain period is fraught with challenges.
With the growth of e-commerce due to the pandemic, savvy retailers are paying more attention to return and test strategies that can reduce volume like 3-D images on websites and stores. AI-powered tools can suggest the right size, he said.
Profits can also create opportunities for fraud. According to the NRF, for every $100 of returned merchandise accepted, the retailer loses $10.30 to fraudulent returns.
