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Cost of returns soars to 761 billion dollars

By Don-Alvin Adegeest

26 Jan 2022

Retail

Image: Norma Mortenson / Pexels

Retailers expect more than 761 billion dollars of unwanted merchandise sold last year to be returned by consumers, according to a report released by the National Retail Federation (NRF) and Appriss Retail. This accounts for an average of 16.6 percent of total U.S. retail sales, which soared to 4.583 trillion dollars in 2021.

“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.”

Soaring returns rate

The rate of returns has increased from 10.6 percent in 2020 to 16.6 percent in 2021, with an average of 20.8 percent. Apparel has a returns rate of 12.2 percent, but is often much higher when multiple sizes are bought.

According to NRF, online sales accounted for 1.050 trillion dollars of total U.S. retail sales last year. Approximately 218 billion dollars of online purchases were returned, with 23.2 billion dollars (10.6 percent) deemed fraudulent.

According to the survey, for every 1 billion dollars in sales, the average retailer incurs 166 million dollars in merchandise returns. It also found that for every 100 dollars in returned merchandise accepted, retailers lose 10.3 dollars to return fraud.

“Retailers must rethink returns as a key part of their business strategy,” said Steve Prebble, CEO 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 - December holiday season reached a total 887 billion dollars, exceeding its forecast of up to 11.5 percent growth. On average, retailers expect 17.8 percent, or 158 billion dollars, of merchandise sold during the holiday timeframe to be returned.