Retailers Brace Themselves For Post-Holiday Returns Surge: 'We're Heading For A Trillion-Dollar Problem Here'

With the end of 2023 in sight, retailers across the United States are bracing themselves for a post-holiday returns onslaught, which could cost them close to a trillion dollars, as per the National Retail Federation’s predictions.

What Happened: The Wall Street Journal reported on Tuesday revealed that consumers returned 16.5% of their purchases last year, marking a significant increase compared to the 2019 figure. This amounted to nearly $817 billion. The issue is anticipated to escalate post-holidays, as returns threaten to take a sizable chunk out of profit margins, leaving retailers to grapple with the uncertain influx of returned items.

“We’re heading for a trillion-dollar problem here,” cautioned Tom Enright, a retail analyst at Gartner.

Optoro, a returns-services provider, predicts that U.S. consumers will return goods worth $173 billion between Thanksgiving and the end of January.

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Inmar Intelligence, a business dealing with reverse logistics, estimates that for a $100 online order return, shipping, warehousing, and labor costs approximately $27. Gartner’s Enright suggests that companies lose about 50% of their margin on returns.

Companies such as H&M and Zara have begun charging customers for mail-in returns, while others like Amazon are cautioning shoppers about frequently returned items and urging them to reconsider their purchases.

Firms like Inmar are stepping in to handle the influx of returned goods and the complexities of various return policies.

Why It Matters: Despite high inflation rates, American consumers have continued their spending spree, largely due to the government’s substantial cash stimulus. This trend has persisted despite the Federal Reserve maintaining the highest interest rates in over two decades. The National Retail Federation expects holiday sales growth to be between 3% and 4%, yet retail sales in the year’s final months are predicted to break records.

Furthermore, a recent rise in the TikTok trend ‘girl math’ indicates consumers’ attempts to rationalize increased spending despite the financial strain caused by high prices.

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