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Average retailer return rate climbs to 16.6% as online sales increase

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Average retailer return rate climbs to 16.6% as online sales increase

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Miami, Doral, IKEA change and flip elevators.

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As shoppers buy more online during the pandemic, they are also returning more clothing, shoes and other purchases to retailers.

On average, retailers expect to recover about 16.6% of total merchandise purchased by customers in 2021, according to survey results released Tuesday by the National Retail Federation and Appriss Retail. That’s a jump from an average return rate of 10.6% in 2020.

What’s more, that’s more than $761 billion in merchandise, according to the survey based on responses from 57 retailers between mid-October and mid-November.

Returns tend to be higher when consumers buy online — a shopping mode that makes it easy to throw items into the virtual shopping cart, but difficult to visualize in person how they will look or fit. Online sales accounted for about 23% of the $4.583 billion in total U.S. retail sales in 2021, according to NRF. Unwanted purchases return to retail stores and warehouses and become a headache for businesses to decide whether to resell these items, have them written off by the manufacturer, or bear the loss.

The average return rate for online purchases was 20.8%, up from 18.1% last year, according to NRF.

In the past, retailers tended to ignore what happened after the sale, said Mehmet Sekip Altug, an associate professor of commerce at George Mason University. But “as online sales increase, the return rate has also increased significantly, and I don’t think it’s a side issue anymore,” he said.

Altug pointed to direct-to-consumer brands like Warby Parker that have opened stores that act as showrooms where people can view items in person rather than relying on website images. Other retailers encourage customers to return an online purchase to a store by waiving the fee, hoping to entice them to buy something else.

Holiday yields are also expected to increase. On average, retailers expect 17.8% or $158 billion of merchandise sold in November and December to be returned, according to the survey. Holiday sales rose 14.1% year-over-year to a record $886.7 billion, according to the trade group.

Some categories generate more returns than others. Auto parts have the highest return rates, averaging 19.4%, according to this year’s survey. This is followed by clothing with an average return rate of 12.2% and renovation and household items, the two categories with an average of 11.5%.

For some retailers, the returns dilemma has inspired acquisitions and new approaches. Walmart bought virtual dressing room startup Zeekit for an undisclosed amount, and Best Buy has an online outlet where it sells open-box appliances, TVs and more that are covered by guarantee. And some other companies, including Amazon, offer refunds but ask consumers to keep certain returned items, rather than deal with the hassle and cost of returning and handling a large, custom-made, or low-value item.

Tony Sciarrotta, executive director of the Reverse Logistics Association, said customers expect retailers to have generous return policies, but this can backfire and encourage shoppers to overorder, such as buying a dress in many colors and sizes. In addition to cutting into profits, he said, a high percentage of returns can trip up retailers as they work towards sustainability goals and try to keep items in stock during a time of chain challenges. supply.

With pandemic-fueled e-commerce growth, savvy retailers are paying more attention to returns and testing strategies that could reduce volume, such as 3D images on websites and AI-powered tools that can suggest the right size, he said.

Returns can also create opportunities for fraud. For every $100 of returned merchandise accepted, retailers lose $10.30 to fraud, NRF found.

Average retailer return rate climbs to 16.6% as online sales increase

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