U.S. e-commerce sales continue to grow, but the number of returns increased during the peak season

U.S. e-commerce sales continue to grow during the 2023 shopping season, but the ensuing wave of returns is also forcing retailers to rethink how they manage inventory and supply chains.

High season returns increase

Despite U.S. consumers being cautious about economic growth and tightening budgets, they continued to spend in the 2023 peak season until the fourth quarter. Some holiday promotions started earlier in October, and Black Friday and Cyber Monday similarly boosted retail sales in November, up nearly 6% from the same month in 2022. After the shopping boom, retailers are facing a wave of returns. In 2022, the National Retail Federation expects the retail industry to have a return rate of 16.5 percent, or about $816 billion worth of merchandise returned, while during the peak season, the return rate is expected to be closer to 18 percent, or about $171 billion.

Returns in 2023 May not be ideal, the report said. In September 2023, returns logistics platform goTRG found that half of retailers believe returns are a serious problem, especially during peak seasons, up from 2% in 2022. In 2023, returns platform Optoro, based on National Retail Federation data and its own analysis, predicts that $173 billion of merchandise will be returned between Thanksgiving and the end of January 2024. Just a day or two after Cyber Monday, nearly 25% of shoppers had returned or planned to return at least one item, according to data management firm Syndigo.

Optoro CEO Amena Ali said that due to the continued growth of e-commerce sales, the volume of returns in 2023 is also high. Returns not only mean a reduction in sales, but also affect the secondary sale price. According to the National Retail Federation, about 44% of retailers it surveyed in 2022 said they would hire more people to handle peak season returns. And the logistics and other costs of handling returns often outweigh the value of the goods themselves. In the NRF survey, 59% of retailers surveyed said they would ask shoppers to keep some of their purchases, and 27% said they would ask shoppers to keep anything under $20 without returning it.

goTRG noted that the increase in online shopping and the convenience of return policies have both pushed up return rates. According to Optoro, about half of shoppers return a product every few months, and 22% return it once a month. Commerce Department data shows that e-commerce sales surged 10.6% in November 2023 compared to the same month last year. According to Adobe Analytics, consumers spent a record $9.8 billion online on Black Friday, up 7.5 percent from a year earlier.

Retailers charge a return fee

Many retailers are reviewing their return policies. According to the goTRG survey, about one-third of retailers in the United States offer a 7-day return window, 27% offer a 14-day return window, 28% offer a 30-day return window, and 7% offer a 90-day return window. More than 40% of retailers plan to shorten the return window during the holiday season.

According to the goTRG survey, nearly half of retailers have also started charging return fees in the past 12 months, following the lead of companies such as Amazon and Zara. Fashion brands such as H&M and Zara are targeting online orders, with H&M offering free returns only to its members. Other retailers have also changed their return policies, such as Bath&Body Works, which says customers can't return or exchange more than $250 without a receipt within 90 days at some U.S. stores and must show a valid ID to track returns and exchanges.

Some experts warn that retailers and brands should be more careful when formulating return policies. Amena Ali cautioned that companies should prevent those who abuse their return and exchange policies through fraudulent means, while establishing a well-functioning return system to better manage inventory and create a good customer experience.

According to research by Trustpilot, a shopping review platform, strict return policies, especially fees, discourage some shoppers who have ordered a lot of items and want to return them. More than 33 percent of U.S. consumers surveyed said they often return goods, and another 30 percent said they used to return goods regularly, while 47 percent of those who stopped regularly shopping online said they were affected by the return fee.

Optoro found that 35% of apparel and accessories consumers order multiple sizes or colors at the same time when they shop online, so they can return some items that don't fit. Vincent Petrillo, vice president of business for North America at Trustpilot, said some consumers are frustrated by the stricter return policy changes, especially as consumer budgets are tight in 2023. According to Optoro, more than 60 percent of shoppers no longer visit retailers that charge return fees, about 64 percent choose to shop at retailers with the most favorable return policies, and about 44 percent of shoppers say free returns are their top concern when shopping.

Seventy-seven percent of Americans say a retailer's return policy affects how much they trust a retailer. Therefore, especially during the peak shopping season, retailers should ensure transparency in their return policies. According to Shopify, allowing customers to return items to offline stores can cause queuing issues and put extra pressure on employees to process returns, but goTRG's data shows that consumers appreciate the convenience of offline returns, and it can also help retailers attract traffic and lead to more online purchases. According to Optoro, 65% of shoppers generate the most returns at the retailer that buys the most. Amena Ali cautions that it costs seven times more to acquire new customers than to retain old ones, so perhaps the customers who return the most are actually the retailers' most loyal customers.