As the holiday season propels consumer spending to unprecedented heights, the retail landscape faces an equally daunting trend: an overwhelming increase in merchandise returns. Dubbed “Returnuary,” January has morphed into the busiest month for processing returns, generating a staggering projection of $890 billion in returned goods, according to a report by the National Retail Federation (NRF). This estimated figure represents a significant rise from the previous year’s return rate of 15% of total U.S. retail sales. The increasing propensity to return items raises questions about consumer behavior and its impact on the retail ecosystem.
The nature of shopping has evolved dramatically, particularly since the onset of the COVID-19 pandemic. Many consumers have adopted new purchasing and returning habits, making online shopping a norm rather than an exception. Consequently, the number of buyers engaging in so-called “bracketing” practices—where they purchase multiple sizes or colors with the intention of returning unwanted items—has surged. An alarming 69% of shoppers have taken this trend further, practicing “wardrobing,” where they buy items for short-term use only to send them back post-event.
This wave of returns doesn’t just disrupt inventory management; it imposes a significant financial burden on retailers. Studies reveal that processing each return costs retailers about 30% of the original price of the item. As operating costs rise amidst an uptick in returns, companies must confront the challenge head-on. According to David Sobie, co-founder of Happy Returns, retailers must address reverse logistics more strategically to mitigate strain caused by escalating return rates.
Moreover, this scenario has broader implications for sustainability. A significant percentage of returned items never find their way back to the shelves. Instead, many are sent to landfills, exacerbating an ongoing environmental crisis. With over 8.4 billion pounds of returns ending up as landfill waste in 2023, it is imperative for retailers to reassess their return management strategies. Rachel Delacour, co-founder of Sweep, underscores that sustainable practices are now integral to retailing’s business strategy.
Faced with the daunting realities of returns, retailers are changing their approaches to customer returns policies. In an effort to minimize the economic impact, a significant number of U.S. retailers—81%—introduced stricter return policies in 2023. These measures include shorter return windows and restocking fees. While such policies may deter non-essential returns, they come with their own set of challenges, particularly in consumer satisfaction.
However, it seems that simply tightening return policies may not be enough. The market is shifting towards enhancing the returns experience itself. An emerging trend among retailers includes initiatives like “keep it” offers, allowing customers to retain the item while still issuing a refund. This approach aligns with contemporary consumer expectations for convenience and simplicity.
In recent years, some brands have turned to innovative solutions to retain more items in circulation. Programs such as Patagonia’s Worn Wear, along with initiatives by J.Crew and even Ikea, are gaining traction as retailers look to circular economies to offset losses incurred from returns. Additionally, many retailers have adopted practices where returned goods are sold at a discount through secondary markets, minimizing waste while creating new revenue streams.
Ali from Optoro emphasizes the necessity of a multifaceted approach to the current returns dilemma. As consumers’ return policies shape their purchasing behavior—especially among millennials and Gen Z—companies must remain attentive to evolving expectations. A significant portion of shoppers now consider return policies as a vital factor impacting their purchasing decisions, with free returns particularly appealing to the younger demographic.
Looking ahead, the retail sector must confront the intricate relationship between consumer behavior and the burgeoning complexity of returns. As the conversation surrounding sustainability grows louder, retailers that can deftly navigate return management while embracing environmentally responsible practices will likely distinguish themselves in an increasingly competitive marketplace. Ultimately, a thoughtful reconfiguration of return policies, driven by innovation and consumer insights, will be essential for retailers aiming to thrive in the face of unprecedented challenges posed by the return culture. The combination of adapting to consumer needs while committing to sustainability seems to be the pathway for future success in the retail landscape.