The holidays are over, which means it’s time for the annual rush of returns. But instead of flocking to stores, unwanted merchandise in hand, shoppers are increasingly mailing back their ill-fitting sweaters, creating new issues for shipping companies and retailers.
UPS, FedEx and others are bracing for what they expect to be a week of record-setting returns as Americans head back to work — and drop off their boxed-up returns on the way. Consumers are projected to take back roughly $90 billion worth of gifts this holiday season, accounting for nearly one-fourth of the year’s returns, according to Optoro, a Washington-based firm that helps retailers manage the returns process.
“While the day after Christmas used to be reserved for long return lines at department stores, the growth of e-commerce has changed when and how consumers return gifts,” Alan Gershenhorn, chief commercial officer for the United Parcel Service, said in a statement.
The company expects to process 6 million returns this week and a record 1.4 million packages on Wednesday alone, which it has dubbed National Returns Day. Overall, UPS estimates it delivered 750 million packages between Thanksgiving Day and New Year’s Eve, up 6 percent from last year. The U.S. Postal Service, meanwhile, says online returns grew 26 percent during the last two weeks of 2017, and that it expects that growth to continue into January.
As consumers do more of their shopping online — e-commerce spending is projected to exceed $100 billion this holiday season — they end up returning more, too. An estimated 25 to 30 percent of online purchases are sent back, about triple the rate for items bought in-store, according to Worldwide Business Research. For clothing and shoes bought online, the return rate can be as high as 40 percent.
For retailers, the spate of post-holiday returns is driving up expenses and creating new challenges that could undo some of the gains they saw during a brisk holiday season. Early projections show that sales rose 4.9 percent during the holidays, accounting for the largest annual increase since 2011, according to Mastercard’s SpendingPulse report.
“The real tale of the tape won’t be known until February and March,” Mark A. Cohen, director of retail studies at Columbia Business School, told The Washington Post last week. “Free shipping is enormously expensive. Returns are enormously problematic, especially for e-commerce players.”
Free shipping and returns have become nearly ubiquitous, particularly during the holiday season, as retailers look to keep pace with Amazon.com, Walmart and Target. As a result, nearly half — 49 percent — of the country’s retailers now offer free return shipping, according to the National Retail Federation. (Jeffrey P. Bezos, the founder and chief executive of Amazon, also owns The Washington Post.)
But processing those returns can be a laborious and costly process. Returned items are typically routed to a central warehouse, industry analysts say, where workers process each transaction and decide whether an item can be resold, or should be sent to an outlet store or third-party discounter or tossed in the trash. Lower-priced goods — typically $40 or less — tend to get discarded, according to Jonathan Byrnes, a senior lecturer at MIT’s Center for Transportation & Logistics.
“Returns are one of the most under-managed and most expensive areas in business,” he said. “Retailers don’t know what to do, so they’re basically putting their heads in the sand and hoping it’ll go away.”
“A return,” he added, “is a failed sale. And retailers want nothing to do with it.”
Optoro estimates that 5 billion pounds of returned goods will end up in landfills this year, as companies struggle to deal with used and damaged items.
Some major retailers, though, have been coming up with solutions to ease the process. Amazon, for example, offers customers store credit right away so they don’t want to wait for their refunds to be processed. Walmart, meanwhile, recently improved its mobile app to make it possible for customers to return items at the store in about 30 seconds. And if a shopper wants to return something like shampoo or lipstick, Walmart offers an instant refund on select items without requiring them to bring back the purchase (which would have likely ended up in the trash anyway).
“We know returning an item and waiting for a refund, especially for a product purchased online, isn’t always seamless,” Daniel Eckert, a senior vice president at Walmart U.S., said in a statement. “We’ve completely transformed the process for our customers.”