The Supply Side: Holiday returns expected to rise 26%; Gen Z most likely to take back gifts

With the increase in online purchases and the shorter holiday shopping season in 2019, the United Parcel Service estimates it will ship more than 1 million packages per day back to retailers in customer returns through the first couple of weeks of January, up 26% from the prior year.

UPS said returns were in the system well before Christmas with more than 1.6 million returns per day the week before Christmas. This escalated after Christmas 2018 to 1.9 million daily returns on Jan. 2, the peak return day of the year.

“Gone are the days where returns were isolated to January. Today’s empowered consumers will be sending packages back to retailers all season long,” UPS chief marketing officer Kevin Warren said.

Warren said to be considered returns rock stars retailers must offer seamless, hassle-free return experiences for customers. He said UPS has invested in more than 15,000 access point locations for consumers to drop off returns in an expanded network that includes Michaels and CVS stores.

Returns can be a headache for retailers as well as consumers. Amazon sought to make the return process easier for its massive customer base by partnering with retailers like Kohl’s and Gordmans to accept returns. Kohl’s management has said the partnership has also helped to draw more traffic into its brick-and-mortar stores.

Belk, Stein Mart and Burlington also allow online orders returned to stores. Customers take the return to register and the product is scanned back into inventory with a cash refund or money transferred back to the payment source.

In 2018, Walmart revamped its returns service allowing customers to start the process from their smartphone via the Walmart app. That expedites the process for customers once they get to the store. Walmart also recently expanded the express returns policy to include online purchases from marketplace vendors. Walmart will credit the customer’s account immediately upon the express return, even for third-party marketplace purchases.

“As e-commerce retailers continue to provide more return-friendly policies, shoppers are buying and returning more online than ever before,” said Andrew Lipsman, a principal analyst for data research firm eMarketer. He said given the late Hanukkah in 2019, the post-Christmas return frenzy will likely run through January.

Consumers just want a hassle-free experience, Lipsman said. According to a UPS survey, digital buyers consider returns experience positively if the retailer offers free return shipping (42%), a hassle-free return policy (28%) and an automatic refund to the original payment method (24%).

“Although returns can eat into retailers’ bottom lines, it’s important they treat the process as a way to build brand and customer loyalty by delivering a great end-to-end shopping experience,” Lipsman said. “That’s what customers have come to expect, and savvy retailers understand that optimizing for customer lifetime value rather than the individual transaction is a path to more sustainable growth and profits over the long term.”

A recent survey by Oracle found 77% of consumers plan to return some of the holiday gifts and nearly 20% expect to return more than half of their gifts.

“Retailers need to seize the moment when shoppers return gifts. The traffic generated by holiday returns holds significant opportunity for retailers to build better customer profiles and generate new opportunities for engagement by personalizing the returns experience,” said Jeff Warren, vice president of retail solutions management, Oracle Retail. Oracle found Generation Z shoppers are the most likely to make holiday returns. The report said while returns are a fact of life for retailers, only a select few are reimagining their returns process.

“When a consumer visits a store to return a purchase, that customer comes with a history and therefore opportunity. Well-informed store associates, with the right technology, are key to identifying the next best offers to save the sale or upsell at the point of service, and positively influence essential key performance indicators (KPIs), like net promoter score (NPS), Warren noted in the report.

He said retailers have to arm employees with technology that provides customer profile data and aligns with inventory and promotions to ensure successful execution. He said the right technology can reinforce important procedures and mitigate the risk of loss, which is another reality of the holiday season.

Analysts said apparel retailers have already had their share of woes in 2019. Macy’s, J.C. Penney and J Crew, for example, have struggled with sluggish sales and lackluster store traffic. A report from e-Marketer found apparel and footwear are the most-commonly returned categories that decrease in value the longer they sit around given their seasonality.

Amit Sharma, CEO of retail software business Narvar, said people are thinking about returns even before they make the purchase. Narvar is a customer experience platform that conducts returns for 200 retailers. Sharma said shipping is negatively impacting gross margins, and the peer pressure to offer free shipping and returns is intense.

He said apparel retailers nearly always lose money on goods that come back even if they charge a restocking fee. With tighter margins, more retailers may trim labor costs and that will mean more consumers will be dealing with chatbots on returns in 2020.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.