This year’s holiday shopping season is expected to reach record levels. But the percentage of those purchases being returned is increasing.
Returns are expected to reach 17% of all product sales in 2024, with total returns reaching $890 billion, according to a new report from the National Retail Federation and returns management company Happy Returns. This is up from a return rate of approximately 15% of total U.S. retail sales in 2023, or $743 billion.
Although returns occur throughout the year, NRF also found that returns occur more frequently during the holiday season. As shopping peaks in the coming weeks, retailers expect holiday return rates to be 17% higher on average than annual return rates.
“Ideally, we would like to live in a world where we can reduce the rate of returns, but this problem is not going away anytime soon,” said Amena Ali, CEO of returns solutions company Optro. spoke.
Why returns are a big problem
The explosion of online shopping during and since the pandemic has led to customers becoming increasingly accustomed to buying and returning habits, with more shoppers ordering items they never intended to keep.
According to Happy Returns, nearly two-thirds of consumers are now purchasing multiple sizes or colors and returning some of them, a practice known as “bracketing.”
Another report from Optro found that even more shoppers (69%) admit to having a “wardrobe,” meaning they buy items for a specific event and then return them. This will increase by 39% from 2023.
Primarily due to these behaviors, 46% of consumers say they return items multiple times a month, up 29% from last year, according to Optro.
These interactions come at a high cost.
“Retailers need to rethink reverse logistics as practices like bracketing and increased return rates strain traditional systems,” said Happy Returns co-founder and CEO. )’s David Sobee said in a statement.
What about returns?
According to Optoro research, it costs retailers an average of 30% of the original price of an item to process a return. But returns are more than just a problem for retailers’ bottom lines.
Spencer Kieboom, founder and CEO of returns management company Pollen Returns, says returns often don’t end up on shelves, making it difficult to improve sustainability. It is also causing problems for retailers.
Repackaging, restocking, and returning products for resale (sometimes overseas) creates even more carbon emissions, assuming they can be returned to distribution.
In some cases, returned items go directly to landfills, and only 54% of all packaging was recycled in 2018, according to the U.S. Environmental Protection Agency, the most recent data available.
The 2023 return will result in 8.4 billion pounds of landfill waste, according to Optoro.
This poses a huge challenge for retailers, not only in terms of lost revenue, but also in terms of the environmental impact of managing revenue, says co-founder and CEO of sustainability data management company Sweep. (CEO) Rachel Delacour said. “At the end of the day, being sustainable is a business strategy.”
To that end, companies are doing everything they can to keep profits down.
Another report from Happy Returns found that in 2023, 81% of U.S. retailers implemented stricter return policies, including shorter return windows and charging return or restocking fees.
While restocking fees and shipping fees can help limit the amount of inventory being returned, retailers also said improving the returns experience is a key goal for 2025.
Currently, 33% of retailers, including Amazon and Target, allow customers to simply “keep it” and offer a refund without having to return the item.
Some are experimenting with buyback programs to keep products in circulation. In 2017, Patagonia launched an online Worn Wear resale program. Many companies later followed its lead, including J.Crew, Neiman Marcus, Coach, and Levi Strauss & Company.
Some IKEA stores buy back used IKEA furniture and resell it at IKEA stores. There’s also Walmart Restored and Amazon Renewed.
Other retailers sell returned items to companies like Once Upon a Child, Plato’s Closet, and Play It Again Sports, where they are marked down and sold as used items.
“We need a solution for all of the above,” says Optoro’s Ali.
How return policies shape shopping habits
According to Happy Returns’ Sobie, return policies and return expectations are increasingly important predictors of consumer behavior, especially for Gen Z and Millennials.
“Return policies are no longer a post-purchase consideration, but are shaping the way young people shop from the beginning,” Sobie says.
According to NRF research, three-quarters of shoppers, or 76%, believe free returns are an important factor in how they spend their money, and 67% say they have had a negative return experience at a retailer. They said they would not want to shop again.
A GoDaddy survey of 1,500 adults found that 77% of shoppers check return policies before making a purchase.
