What to Know
- After this season’s peak holiday shopping days, retailers expect their return rate to be 17% higher, on average, than usual.
- By the end of 2024, returns are expected to total $890 billion.
- The growing amount of returned merchandise is a major problem for retailers, and comes at a high environmental cost.
After a strong start to the holiday season, consumer spending is on track to reach record levels this year. But many of those purchases will soon be returned.
How Returns Became an $890 Billion Problem
With the explosion of online shopping during and since the pandemic, customers got increasingly comfortable with their buying and returning habits. Almost two-thirds of consumers now buy multiple sizes or colors, some of which they then send back, a practice known as "bracketing." Even more – 69% – of shoppers admit to "wardrobing," or buying an item for a specific event and returning it afterward.
What Happens to Returned Goods
Processing a return costs retailers an average of 30% of an item’s original price. But returns aren’t just a problem for retailers’ bottom line. Often returns do not end up back on the shelf, and that also causes issues for retailers struggling to enhance sustainability, according to Spencer Kieboom, founder and CEO of Pollen Returns.
The Environmental Impact of Returns
Sending products back to be repackaged, restocked and resold – sometimes overseas – generates even more carbon emissions, assuming they can be put back in circulation. In some cases, returned goods are sent straight to landfills, and only 54% of all packaging was recycled in 2018, the most recent data available, according to the U.S. Environmental Protection Agency. Returns in 2023 created 8.4 billion pounds of landfill waste, according to Optoro.
How Retailers Are Adapting
To address the issue, companies are implementing stricter return policies, including shortening the return window and charging a return or restocking fee. Some retailers, such as Amazon and Target, are also allowing customers to "keep it," offering a refund without taking the product back.
For Shoppers, Return Policies Are Key
Increasingly, return policies and expectations are an important predictor of consumer behavior, according to Happy Returns’ David Sobie, particularly for Generation Z and millennials. A survey of 1,500 adults by GoDaddy found that 77% of shoppers check the return policy before making a purchase.
Conclusion
Returns are a major problem for retailers, causing financial losses and environmental impact. To address the issue, retailers are implementing stricter return policies and trying to keep returns in check. For shoppers, return policies are key, with 77% checking the return policy before making a purchase.
FAQs
Q: What is the expected return rate for holiday shopping?
A: 17% higher than usual, on average.
Q: What is the expected total value of returned goods in 2024?
A: $890 billion.
Q: What is the environmental impact of returns?
A: Returns generate carbon emissions and contribute to landfill waste, with only 54% of packaging being recycled in 2018.
Q: How do retailers adapt to the issue of returns?
A: Retailers implement stricter return policies, including shortening the return window and charging a return or restocking fee.
