Retail’s $761B Problem — Holiday Returns Soar To A New High

The surge in the Omicron variant pushed more consumers to shop online during the holiday season, and with that shift retailers are expecting to see a higher volume of returns.

According to the Nation Retail Federation, retailers expect to see a return of 16.6% of the total merchandise they sold in 2021, up from 10.6% percent in 2020. This equates to a stunning $761 billion in returned merchandise, with the average rate of returns increasing to 20.8% — an increase from 18.1% last year.

An increase in online returns is a massive headache for retailers as they must either restock and resell those items, get them written off by the product manufacturer, or absorb the cost of the loss.

Returns of holiday purchases that were made in the final stretch of the holiday season, in particular, are expected to rise higher. Retailers, on average, expect to see 17.8% of sales worth $158 billion that were sold in November and December to be returned. Returns are expected to be particularly high for auto parts (19.4%), followed by apparel (12.2%), home improvement and housewares (11.5% each).

An increase in holiday returns also poses other indirect challenges for retailers. For example, a higher rate of return makes it more complicated for retailers to keep products in stock, especially as they are dealing with ongoing supply chain challenges. A higher rate of returns can also derail sustainability goals as there is a higher carbon footprint associated with returned products.

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