The Supply Side: Retailers adapt strategies to address holiday shopping trends

With holiday shopping well underway, retailers large and small continue to wrestle with shipping options, return policies and overcoming cart abandonment from online shoppers.

A new survey from shipping platform uShip and research firm Censuswide found that shipping and returns policies heavily influence consumers’ holiday purchase choices this year. According to the report, almost half of surveyed U.S. consumers returned at least one gift or more to the seller during the 2022 holiday season, and 40% expect to return at least one or more holiday purchase in 2023.

One-third said they plan to buy multiple items knowing they’ll have the option to return them later, and 32% also said they plan to purchase only from retailers who offer free shipping and free returns.

Retailers already facing promotional markdowns expected to crimp margins must also deliver on free shipping or offer in-store pickup for most holiday shoppers this year, the survey reports.

“Our Consumer Holiday Shipping Report suggests ‘free returns’ is the new ‘free shipping,’” said Heather Hoover-Salomon, CEO of uShip. “With one-third of buyers making returns a part of their buying strategy, retailers need to offer a consumer-friendly return policy — or risk losing customers to the competition.”

Among survey respondents, 63% prioritize sustainable shipping, while 30% indicate they plan to procrastinate their holiday shopping until early December or the week before Christmas.

The biggest pet peeve of the 2022 holiday shopping season was delayed shipments and extended delivery times. Another 31% said a complicated shipping and delivery process would deter them from purchasing a large item.

A separate survey by Blue Yonder found that consumers prefer accessible return policies more than ever. The survey found that 69% of consumers knew that many retailers had tightened return restrictions, and they generally didn’t view the changes favorably. More than 60% of respondents said the new policies were inconvenient or unfair to consumers.

Instituting a restocking fee has proven to be the least popular return policy, selected by more than 55% of respondents. Following that were shortening return windows (20%), restricting returns to physical locations (13%) and restricting which products can be returned (10%).

Blue Yonder found that stricter return policies have deterred 59% of respondents from purchasing. Lenient policies significantly or moderately influenced buying for 71% of surveyed shoppers.

HOLIDAY RETURN POLICIES
Major retailers have tweaked their holiday return policies this year. Walmart offers a 90-day window to return items bought online or in stores. That return policy has been extended through Jan. 31, which is 120 days if purchased by Oct. 1. Walmart accepts most online returns in stores and will also pick up an item and return it for its Walmart+ InHome members.

Target gives a standard 90-day return, 120 days for its Target RedCard members. If the item is a Target brand or something from a gift registry, the retailer provides a whole year to make the return. Target offers a drive-up service at its stores that allows the return in the parking lot.

Best Buy gives shoppers 15 days to return items and 14 days for devices like phones or tablets. The retailer provides its loyal customers 60 days to make returns, excluding phones and tablets.

For items purchased on Amazon or Amazon Warehouse, customers typically have 30 days to return the items, which is a short time for buying items intended as holiday gifts. In cases where an item gifted does not work and the 30 days have passed, a refund of up to 80% can be received on an Amazon gift card. In most cases, shoppers can also exchange a defective item.

CART ABANDONMENT
Retailers of all sizes are still trying to overcome cart abandonment — not completing a purchase once something is put into the online cart. A report from YouGov and Commercetools found that the most significant reason U.S. shoppers abandon their online carts is shipping costs. The second reason is that consumers wait for the item to go on sale.

The report found that budget consciousness drives many online shoppers to abandon shopping carts. The report found that higher-income consumers are looking for the best possible deals across online retailers, while lower-income shoppers wait for products to go on sale.

Another reason carts are abandoned is because consumers get distracted, and in a few cases (8%), shoppers said they opted to complete the purchase in a physical store.

“When carts are abandoned, revenue is lost. Given higher interest rates and slowed — not halted — consumer spending across the U.S., retailers need to focus on offering a wide array of payment options, investing in easy-to-use loyalty programs that provide distinct financial benefits, and personalization in engagement from product discovery to post-purchase,” said Jen Jones, chief marketing officer for Commercetools, a digital marketing firm.

Jones said that with forecasts pointing toward a lower peak season compared to 2022 and multiple data indicating the need for a discount-heavy season, retailers are revising their 2023 holiday approach. She advises retailers to invest in technology that enables flexibility and innovation at speed and adjust production calendars and supply chains to address early gift buying.

Other shopper behaviors gleaned from the survey include male shoppers as more likely to look for a better deal elsewhere, and female shoppers said their top concern was paying for shipping. YouGov found that U.S. consumers were likelier to abandon their shopping carts than the United Kingdom.

Consumers aged 55 and older cited shipping costs as the No. 1 reason they abandoned their carts. Younger Gen Z consumers (ages 18-24) want to find better deals elsewhere. Many U.S. shoppers said they didn’t mind picking up items in a local store to save on shipping costs.

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 Firebend.