Study: Online returns could exceed $80 billion this holiday season

Retailers could be looking at a costly challenge this holiday season: the increased cost of returns.

Online returns could total as much as $82.1 billion in the U.S. this holiday season, according to new data from real estate firm CBRE and return technology provider Optoro. The estimated total was calculated by applying the standard percentage range for online returns – 15% to 30% – to this year’s projected holiday retail sales, which are $273.7 billion, a 7% year-over-year increase.

Optoro estimates that the cost of returns in the U.S. has increased by $149 billion, or 50%, since 2018. The cost to return a purchase averages 27% of the purchase price, potentially erasing as much as 50% of the sales margin.

A recent consumer survey by Optoro found that 64% of respondents said they would favor retailers that offered the best return policies. More than four-in-10 (44%) said that free shipping of returns was of particularly high importance.

“Reverse logistics have a huge impact on retailers’ bottom lines, and the most effective retailers have built their supply chains to effectively handle the reverse flow of merchandise,” said Joe Dunlap, managing director, Supply Chain Advisory at CBRE. “Smart return policies, enlisting help in third party merchandise handlers and making the returns process easy for customers all help retailers increase their rate of recovery on returns.”

Many retailers already started making consumer-friendly changes ahead of the holiday season. Optoro found that 87% of retailers revised their return strategy in 2023 to include additional drop-off locations, charging for returns, allowing customers to keep certain returns, policing fraud and providing an online returns portal. Of those retailers surveyed, 44% increased their return and restocking fees.

“A tide is turning in returns. Five years ago, returns were taboo in retail. Now, smart retailers have realized that returns are a revenue opportunity,” said Optoro CEO Amena Ali. “The right technology and strategy can not only cut costs and limit waste but deliver an experience that can win customers in the long run. It’s not just about prevention anymore, it’s about capitalizing on the prime return opportunity."