A recent headline in CNBC screams out “A $761 billion dilemma: Retailers’ returns jump as online sales grow.” Among other things, the pandemic has helped to spur an increase in online shopping. Many of us, myself included, get a lot of our essentials from online stores and marketplaces. However, it’s one thing to shop for ourselves and another thing entirely to shop for a gift for someone else. Getting gifting wrong can significantly contribute to the high cost of returns for retailers.
The Gifting Journey
Think about it, when you’re shopping for yourself, you pretty much know what you want or need. Maybe it’s a sweater, a handbag or a pair of shoes. You know what size you wear, what color you want and where you want it shipped.
But, what if you’re trying to buy a gift for a friend or relative? You may have an idea of what color sweater, kind of handbag or type of shoe but would you know the right size or color that they want or need? Do you have their shipping address? Shopping for others can be very stressful. What happens if you get it wrong? A wrong choice that requires the recipient to make a trip to the retailer or UPS store can contribute to the high cost of returns.
E-gifting can help reduce the stress by making it easier for a shopper to be comfortable making a gifting purchase that they know the recipient will enjoy and appreciate (or have the ability to alter or exchange it for something else that they truly do want.
The High Cost of Returns: Some Scary Statistics
According to the National Retail Federation and Appriss, retail returns increased an average of 16.6% in 2021 versus 10.6% in 2020, leading to more than $761 billion of merchandise that retailers expect will wind up back at stores and warehouses, much of which will never make it back to the store shelves.
Per the NRF, online sales accounted for $1.050 trillion of total U.S. retail sales in 2021, of which about $218 billion of online purchases were returned, with $23.2 billion (10.6%) determined to be fraudulent. A lot of these items come back to retailers’ stores and warehouses and create a headache for these businesses that must determine whether they can resell those items, have the manufacturer write them off or just take the loss, further contributing to the high cost of returns.
Further, new data from the NRF and Appriss states:
- Total returns account for over $761 billion in lost sales for U.S. retailers.
- For every $1 billion sales, the average retailer incurs $166 million in merchandise returns.
- For every $100 in returned merchandise accepted, retailers lose $10.30 to return fraud.
Here are some other scary statistics:
- As cited by Pam Danziger in Forbes: in 2021, the NRF estimated 13.3% of merchandise ($101 billion) purchased over the holiday season was returned. Doing the math, if returns meet last year’s pace which was projected $843.3 to $859 billion sales, retailers may receive $112 to $114 billion in returns, including $43 to $45 billion via e-commerce sales. But Inmar Intelligence found 61% expect this year’s return rates to be even higher than last year. On top of that, returns logistics could increase 7% this year when factoring in processing, transportation, discounting and liquidation costs.
- According to UPS, they will handle over 60 million returns this holiday season, an increase of 10% over 2020. Over one fourth of Americans (27%) plan to make a return over the holiday season with 41% saying they expect to return three or more items.
What We See at GiftNow
Because our GiftNow solution provides us with a wealth of data and information, we can also see what’s happening relating to our partners. In 2021, our aggregated data showed 34% of gifts sent using GiftNow were modified (19%) or exchanged (15%). That’s not a bad thing in any way. In fact, there’s some positive aspects to this:
- It means that people may be more comfortable with gifting more challenging categories like shoes, clothing and jewelry because they know that the recipient can adjust the size and color, for example. This can help to reduce the stress of buying gifts for others and can help to grow the gifting market.
- It means that potentially 34% of the gifts didn’t have to be physically returned so that retailers don’t have to deal with things like return shipping costs, reverse logistics, restocking costs or simply eat the cost of the merchandise.
- Fewer returns also has a beneficial impact on the environment and sustainability. No need to burn fuel and create pollution by shipping returns back to a store or distribution center and fewer goods and packaging materials may end up in landfills.
E-Gifting Can Help Reduce the High Cost of Returns
E-gifting solutions, like GiftNow, can help reduce the high cost of returns by making it easier for the recipient to alter or exchange their gift before it is ever shipped by the retailer. This has the potential, according to our data, to reduce returns by over one third and can help to put a dent into that scary $761 billion dollar dilemma. It can also help to open up new categories for easier gifting, a win for gift givers, gift recipients and retailers.
Kevin Payne is the Vice President of Corporate Marketing for GiftNow
You might also enjoy: