During the aftermath of the holiday shopping season, retailers face a significant rise in return requests, challenging their logistical capabilities and impacting profits.
The period between December 26 and 28 marks the zenith of return activities for retailers, with returns tripling the usual numbers. A review by Lightspeed Commerce, based on data from the past two years, underscores the scale of this trend. Marcus Shen, CEO of B-Stock, notes that the volume of returns has consistently increased, particularly for categories like clothing, electronics, and toys. The National Retail Federation (NRF) report indicates that nearly 17% of goods sold, valued at $890 billion, are expected to be returned this year, compared to about 8% in 2019.
This surge in returns is partly fueled by the expansion of e-commerce and consumer-friendly return policies. Some customers engage in ‘bracketing,’ purchasing multiple sizes or colors of an item with the intent to return the ones that don’t fit or suit them. Furthermore, retailers like Amazon and L.L. Bean have varied approaches to managing returns, including free returns in stores to cut shipping costs and fees for mail-in returns.
The costs associated with handling returns are substantial, involving expenses from shipping to discounting returned items for resale. Consequently, retailers are innovating to mitigate these costs. For instance, Amazon offers discounts on groceries if returns are made at their Amazon Fresh stores. Similarly, outdoor retailer REI has restricted frequent returners to curb excessive returns, while L.L. Bean implements a small fee for mail returns.
The NRF’s study highlights that 76% of shoppers base their shopping decisions on the availability of free returns, emphasizing the delicate balance retailers must maintain between accommodating customer preferences and managing operational costs. Retailers now focus on efficient return processing to minimize the financial drain from unsold returned goods, often deciding whether to write off or resell them at a discount.
This operational challenge demands strategic responses. Retailers are caught between the need to provide customer-friendly policies to drive sales and the imperative to control costs. These strategies reflect broader trends in the retail industry as companies strive to adapt to evolving consumer behaviors and technological advancements.
As the trend of returns continues to rise, retailers must innovate and adapt to manage operational costs and meet consumer expectations, thus ensuring their profitability and sustainability in a competitive market.
Source: Businessinsider
