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That unwanted kitchen gadget or too-big sweater someone gave you over the holidays represents a growing problem for retailers.
With the holiday shopping season over, retailers now face return requests from customers at the fastest pace of the year. The days between December 26 and 28 are the busiest for returns, with up to three times more than usual, payments platform Lightspeed Commerce found in a review of returns data collected over the last two years.
The amount of stuff that gets returned has been growing each year, too.
Marcus Shen, the CEO of B-Stock, which resells returned items and other excess merchandise, told Business Insider that his company has seen the volume of returns that it processes grow over the last few years. Some of the most-returned items include clothing, electronics, and toys, Shen said.
The share of goods returned to retailers is expected to reach almost 17% and be worth $890 billion this year, a report from the National Retail Federation, or NRF, found earlier this month. In 2019, it was about 8%.
The growth of e-commerce — and easy return policies at many retailers — has contributed to that explosion of returns, Shen said. Some shoppers even plan on making returns from the start with strategies like bracketing, which is buying multiple sizes or colors of an item with the intent to keep just one and return the others.
"I think that a lot of these very consumer-friendly policies are really a big driver here," Shen said.
Returns represent extra costs for the stores that handle them, whether it's the cost of shipping or marking down the price of the returned item when reselling it.
Many companies try to trim the costs of returns by offering customers incentives to use less costly methods. Earlier this year, for example, Amazon offered customers discounts on groceries if they stopped by an Amazon Fresh store to make a return.
Many retailers offer at least one free way to return a purchase, which often involves customers dropping their return off at a store or other physical location. That usually saves the retailer the cost of shipping the item from a customer's home to a processing center.
Many have also added incentives — or penalties — meant to steer customers toward those options.
Outdoor retailer REI, for instance, recently banned some customers who made frequent returns from doing so in the future. The action targeted a group of customers that had an average return rate of 79% on purchases, REI told ABC in November.
Amazon took a different approach with one of its policies, which tries to preempt returns entirely by letting shoppers on its website know when a product is frequently returned.
Other companies, such as L.L. Bean and GameStop, assess a fee of less than $10 in order to mail something back to them.
"Retailers are responding by investing in a variety of innovative returns options," the NRF said in its report. "But, at the same time, they are facing growing costs for managing and processing returns."
The NRF's report found that 76% of shoppers decide where to shop based on whether the retailer offers free returns.
"Given the priority shoppers place on free returns, retailers have to walk a fine line in implementing these policies," the NRF said in its report.
At the same time, retailers are paying more attention to controlling the costs of processing returns, Shen told BI.
Getting merchandise back to retailers is only part of the challenge: Once a retailer has the item, it has to decide whether to write it off completely or resell it at a discount, either to its own customers or through companies like Shen's.
"It's cash that's sitting on the floor of a warehouse," he said.
