Retail Returns Rising, But It’s Not All Bad
Retail returns of merchandise bought in 2021 will total a whopping $761 billion — and that’s a good chunk of last year’s total sales growth in the U.S.
But the figure isn’t really surprising considering U.S. sales soared to over $4.58 trillion due to steadily increasing foot traffic in stores through most of the year, and sustained online sales gains. The Omicron variant did drag down store traffic in December.
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The $761 billion in merchandise that’s expected to be returned by consumers is a figure from the findings of a survey by the National Retail Federation and Appriss Retail of 57 retailers conducted Oct. 13 to Nov. 15, 2021. Appriss Retail, a division of Appriss Inc., provides artificial intelligence-based solutions to help retailers protect margin, unlock sales, and cut shrink.
According to the NRF and Appriss, the figure on returns represents 16.6 percent of total U.S. retail sales last year. That’s up from 10.6 percent during 2020 (when retail sales were just over $4 trillion) but online returns are in line with recent years at an average of 20.8 percent. NRF’s numbers exclude automobile dealers, gasoline stations and restaurants.
“As total retail sales continue to accelerate from sustained consumer demand during the pandemic, it is no surprise that the overall rate of returns has also been impacted,” said Mark Mathews, NRF’s vice president of research development and industry analysis. “While retailers have indicated that they are seeing an increase in items returned to stores and online, the upside is that it also provides them with additional opportunities to connect further with customers and provide a positive experience.”
According to NRF, online sales accounted for $1.050 trillion of total U.S. retail sales last year. About $218 billion of online purchases were returned, with $23.2 billion (10.6 percent) deemed fraudulent.
According to the survey, for every $1 billion in sales, the average retailer incurs $166 million in merchandise returns.
It also found that for every $100 in returned merchandise accepted, retailers lose $10.30 to return fraud. The categories with the highest return rates were similar to 2020 metrics: auto parts, 19.4 percent; apparel, 12.2 percent, and home improvement and housewares tied at 11.5 percent.
The most common types of payment used during the original purchase that led to a return were credit cards, 22.78 percent; cash, 12.69 percent, and debit cards, 7.04 percent.
“Retailers must rethink returns as a key part of their business strategy,” said Steven Prebble, the chief executive officer of Appriss Retail. “Retail is dealing with an influx of returned items. Now is the time to stop thinking of returns as a cost of doing business and begin to view them as a time to truly engage with your consumers.”
Earlier this month, NRF reported that retail sales during the November-to-December holiday season reached $887 billion. On average, retailers expect 17.8 percent, or $158 billion, of merchandise sold during the holiday time frame to be returned.
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