A muted holiday season is expected as the National Retail Federation (NRF) forecasts retail sales to grow between six and eight percent over 2021 to between $942.6 billion and $960.4 billion.
“While consumers are feeling the pressure of inflation and higher prices, and while there is continued stratification with consumer spending and behavior among households at different income levels, consumers remain resilient and continue to engage in commerce,” NRF President and CEO Matthew Shay said in a statement.
The expected growth in retail sales will also result in higher returns.
According to the Reverse Logistics Association’s (RLA) quarterly returns index, survey respondents expect fourth-quarter returns costs and volumes to increase.
The availability of holiday returns data is sparse, but UPS’s annual holiday returns statement typically serves as a proxy.
In 2021, UPS forecasted that it would handle a record of more than 60 million returned packages from November 14, 2021 to January 22, 2022, a 10% increase from 2020.
UPS also expected one in four consumers to make a return. Of those returning items, 41% say they plan to return three or more items. More than one in five consumers made a return before Christmas.
This year’s holiday season will likely focus more on returns as retailers look to mitigate costs.
In a Forbes interview, Steve Rop, chief operating officer at goTRG, an RLA member, said, “It’s not sustainable for retailers and DTC brands to continue to absorb the costs for returns. It all comes down to economics.”
A market research report from Apriss Retail and Incisiv found more than two-thirds of retailers surveyed (69%) said they treat returns as a cost center, while the same number said they lacked a good understanding of the root cause of returns.
“Returns can feel like a second-class citizen,” Nathan Smith, SVP of products at Apriss Retail, told the online news outlet, Multichannel Merchant. “There is no chief returns officer responsible for the end-to-end flow because it’s split between different silos in the company, and no one person owning it.”
Indeed, RLA has several research projects to understand total returns in companies. We’re now seeing some retailers charge a small fee for returns and others telling customers to keep certain returns because the returns cost is too high for retailers.
Third-party reverse logistics service providers are investing in automation to reduce returns costs while retailers utilize their omnichannel strategies to encourage customers to return items to stores, thereby helping reduce transportation costs to pick up and transport to a store or warehouse.
Overstock.com and UPS are testing a returns service during the holiday season in which Overstock.com customers can have product returns picked up at home without reboxing the product.
The Overstock.com and UPS pilot is similar to a collaboration between FedEx Office and Happy Returns, now owned by PayPal. However, with the FedEx Office and Happy Returns partnership, consumers bring unboxed returns to a FedEx Office location, including a QR code generated from initiating the return process online. Using Happy Returns’ technology, FedEx aggregates box-free items from multiple merchants into a single shipment, reducing the cost of the process for participating retailers.
As companies emerge from the pandemic in which supply chains were costly due to high transportation and warehousing rates and worker shortages, companies are now looking at their reverse supply chain as a means to mitigate costs and improve processes.
Tony Sciarrotta is Executive Director of the Reverse Logistics Association. The RLA offers various tools, white-papers, and monthly webinars that provide best practices in managing reverse logistics.
This article originally appeared in the November/December, 2022 issue of PARCEL.