The holiday season is all about traditions.
This being Christmas, in many homes that means opening gifts, thanking the giver profusely and then plotting out the easiest way to return whatever it was you were just given. Yes, returns have always been a part of the season of giving, but with the rise and accelerating growth of ecommerce, they are becoming a growing cost center for retailers.
Last year nearly half the U.S. population returned holiday gifts, valued at $90 billion, according to returns logistics company Optoro. In fact, shoppers and gift-getters didn’t even wait for Christmas to start returning items.
The Wall Street Journal reported that of the 800 million packages UPS expects to move in December, 24 million will be packages headed back to where they were purchased. The Journal said UPS predicts the busiest day for returns will end up being Dec. 19, outstripping the post-holiday peak on January 3.
Holiday returns cost retailers billions
The return hit actually could be much higher. The Journal quoted figures from a return-processing company called Happy Returns that put the 2017 return figure at $350 billion and predicted the number would reach $550 billion by 2020. There was no readily available explanation for the difference, but the $350 billion is closer to the total returns for the year reported elsewhere.
The point is, returns can be a margin crusher, even during retail’s most prosperous stretch. And this particular holiday season has been prosperous indeed, at least in the United States. In fact, the Journal reported that retail sales in the United States were up 5.2 percent over last holiday season, in part because of rising consumer confidence based on a strong economy.
In Europe, the news was not as rosy, with Reuters describing “European gloom” and pointing to the unknown effects and conditions of the UK’s Brexit, protests in France and generally slow economic growth. All of which could mean the hit from returns is even harder on European retailers. Ceconomy, a key electronics seller; Primark; Superdry, OVS and Inditex all issued downbeat reports on holiday activity.
Consumers have continued to show an enthusiasm for online shopping and omnichannel services that fit their needs. Online shopping this season broke records, Footwear News and others reported. Every year is pretty much a record year as ecommerce continues to grow as a percentage of all shopping.
Ecommerce continues torrid growth pace
The Footwear News report, based on Mastercard data, said ecommerce grew 18.3 percent over last holiday season — a period that saw 16.9 percent growth over 2016. 2018’s boost was the highest increase since 2005, according to the Mastercard data. And, yes, consumers were relying more on mobile to shop and buy. They also turned to buy online pick up in store more than ever before.
Sales in the buy-online-pick-up-in-store category were up 47 percent from Nov. 1 to Dec. 19 this year, according to Adobe data as reported by the Wall Street Journal.
The move to the BOPIS model is just another sign that consumers are expecting to be able to shop when they want, how they want and through the channels they find most convenient. In fact, retailers’ return woes can be traced to the same phenomenon: The rise of the empowered shopper.
Survey after survey finds that shoppers seriously consider return policies before buying online. Two-thirds of shoppers told UPS that they review return policies before buying. Fifteen percent abandon their carts if the policy is not clear.
As for BOPIS, a JDA Software survey found that 49 percent of consumers had used BOPIS in the year leading up to the survey. That marked a 43 percent increase from two years earlier. Retailers surveyed by Signifyd through polling company Survata said they saw BOPIS as a competitive need.
BOPIS is a necessary competitive offering
Forty-four percent of the enterprise retail professionals surveyed said they offered BOPIS to gain a competitive advantage, including 12.4 percent who said the service was an important way to compete with Amazon. Still, double-digit percentages said BOPIS created additional challenges, ranging from logistics and tracking, to training staff, to distinct fraud vulnerabilities.
Despite the difficulties, Kurt Salmon, a part of Accenture Strategy, found that retailers are getting better at offering the service. Researchers told CNBC that 65 percent of their pick-up-in-store orders were filled with no issues and that their average wait in stores was seven minutes — the best performance they’d seen in their tracking.
So, it seems that free and easy returns are not going anywhere, no matter how painful they are for retailers. And buy online, pick up in store is going to continue to grow as a sales channel. Retailers would be wise to adjust their practices and policies to address each.
After all, it seem they are among the newest holiday traditions.
Photo by Mike Cassidy