Once upon a time, Santa’s job was all done by midnight Dec. 25, but not anymore.
Because no sooner have billions of dollars of merchandise and products made it safely down the chimney than customers are looking to load back up the sleigh with returns, costing the retail industry a margin sapping $743 billion in the year just past.
Amid the numerous challenges facing U.S. retailers this year, the rate of returns has become a real headache for the industry according to a new report from retail organization the National Retail Federation (NRF).
As a result, retailers have become increasingly focused on efforts to mitigate returns, as total returns for the industry amounted to $743 billion in merchandise in 2023, according to a late year report from the NRF and Appriss Retail.
As a percentage of sales, the total return rate for 2023 was 14.5%, so for every $1 billion in sales, the average retailer incurred $145 million in merchandise returns.
Online sales saw an even higher return rate, with 17.6%, or $247 billion, of merchandise purchased online returned. That compares with 10.02% for pure bricks-and-mortar returns (excluding online orders that are returned in-store), or $371 billion.
This year, return fraud contributed $101 billion in overall losses for retailers, which means that for every $100 in returned merchandise, retailers will lose $13.70 to return fraud the NRF said.
Returns Fraud Concerns
As concerns around return fraud continue to grow, retailers are bolstering their efforts to mitigate the related losses, the NRF said. With increases in both in-store and digital traffic, many retailers are testing in-store policy changes and limiting the flexibility of online returns, while trying to balance customer service.
Among the types of return fraud retailers said that they have experienced in the past year, nearly half (49%) cited returns of used, non-defective merchandise, also known as ‘wardrobing’, and 44% cited the return of shoplifted or stolen merchandise.
Over one-third (37%) added that they experienced returns of merchandise purchased on fraudulent or stolen tender and one-fifth (20%) said they have experienced return fraud from organized retail crime groups.
Retailers Look To Cut Losses
“Retailers continue to test and implement new ways to minimize losses from returns, particularly those that are fraudulent, while at the same time optimizing the shopping experience for their customers,” said NRF Executive Director of Research Mark Mathews at the launch of the report.
“Retailer’s efforts include providing greater detailed descriptions on sizing and fit of products for online purchases and requiring a receipt with returned items. As a whole, the industry is prioritizing efforts to reduce the amount of merchandise returned in stores and online,” he added.
Although the holiday season is typically one of the biggest sales periods of the year for retailers, most retailers said that they only expect a slight uptick in the return rate compared with the rest of the year. The study found that $148 billion in holiday merchandise is expected to be returned at a rate of 15.4%. However, retailers anticipate nearly $25 billion in fraudulent returns, which would represent 16.5% of total holiday returns.
For the research, NRF partnered with Appriss Retail to pair its customers’ returns data with NRF survey responses. Appriss Retail’s customers include 60 of the top 100 retailers in the United States.
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