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Holiday returns to soar — and so are retailer’s return costs

Consumers will return at least $66.7 billion in holiday purchases, up 13% year-over-year.

Retailers should be prepared for a surge of holiday gift returns.

According to a new report from CBRE and Optoro, consumers will return at least $66.7 billion in holiday purchases, up 13% year-over-year and 45.6% over the previous five-year average. Two out of three consumers will return at least one gift during the holiday season, the report said.   

The increase in returns comes as more and more consumers are shopping online — online sales have a higher-than-average return rate. The National Retail Federation forecasts that online and other non-store sales, which are included in the total, will increase between 11% and 15% to a total of between $218.3 billion and $226.2 billion driven by online purchases. The total is up from $196.7 billion in 2020.

Retailers’ returns processing costs are skyrocketing, according to the report. On average, it now costs $33 or 66% of the price of a $50 item for retailers to process a return — up from 59% last year. An array of factors are contributing to the high cost of returns, including transportation, processing, discounting and liquidation losses.

Other highlights from the report are below.

• High-value electronics like laptops, tablets and cell phones will see the highest reverse logistics costs per item. The electronics segment has historically seen costs that are as much as 15 times higher than other product segments due to size, testing, refurbishing and online-sales-platform fees.

• Lower-value segments like apparel and general merchandise have much lower reverse logistics costs, but relative to the retail value of the unit they are much higher than electronics.

• The number of consumers who preferred returning items to stores fell to 40% in 2020 from 67% in 2019, likely due to pandemic-related fears. This year, Optoro reported that while 39% of consumers prefer to make returns directly to a retailer’s physical store, an increasing number prefer to drop off e-commerce retail returns at a third-party store, similar to Amazon’s program offering return service at Kohl’s stores.

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