Value of Holiday Returns Estimated to Hit $90 Billion

What goes out must often come back, and this year is expected to set another record for holiday returns, according to Optoro, a firm that specializes in reverse logistics.

Optoro estimates $90 billion worth of holiday gifts will be returned, with January representing just over half of the year’s returns.

According to UPS, Jan. 3 was the peak day for holiday returns, with 1.4 million packages processed by the carrier, a record and up 8% from 2017. In all 6 million returned packages were processed by UPS in the first week of January.

A boom in 2017 holiday sales, combined with more consumer-friendly policies on returns and ecommerce growth in general, all contributed to the increase in this year’s holiday returns. MasterCard’s SpendingPulse estimated sales between Nov. 1 and Christmas rose 4.9%, the largest gain since 2011, with ecommerce increasing 18.1%.

“As a result of this growth we can expect more returns as both holiday and ecommerce sales have higher return rates,” said Tobin Moore, CEO of Optoro. According to the National Retail Federation, the annual rate of returned goods is 11.3%, up from 8.6% in 2015.

In terms of return policies, demand is not only driving more consumer-friendly policies but also impacting sales. According to an Optoro survey, 46% of shoppers said they will abandon an online shopping cart if a retailer doesn’t offer free returns, 71% said that a positive return experience greatly encourages them to shop the retailer again.

UPS’s 2017 Pulse of the Online Shopper survey found similar results on the impact of return policies. Seventy-nine percent of consumers said free return shipping is important when selecting an online retailer, while 44% said paying for a return is the top issue encountered when sending something back.

“Retailers now see policies like free return shipping or longer return windows as a necessary part of the customer experience, and must put smarter systems in place to manage and resell the increased number of returned inventory,” Moore said.

More retailers are moving from an “avoid and prevent” to an “embrace and solve” approach to returns, Moore said. While some are trying to stem the reverse flow with more accurate online descriptions, images and sizing guidelines, most see returns as a necessary cost of doing business and are investing to improve the overall process in terms of both the customer experience and logistics.

“For example, Walmart announced more efficient in-store returns kiosks, and Amazon has partnered with Kohl’s to accept returns in their stores,” Moore noted. “At the same time, more and more retailers are looking at their back-end systems and seeing how they can optimize returns to minimize the financial impact.”

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