Product returns rate jumps to 16.6% of total U.S. retail sales
Retailers struggle to process returns profitably due to customer fraud, lack of automation, NRF and ReverseLogix surveys find.
Consumers are mailing stacks of product returns back to U.S. retailers after the winter peak shopping season, with the incoming goods totaling 16.6% of total U.S. retail sales, a sharp increase from the 10.6% they returned in 2020, the National Retail Federation (NRF) said today.
The rate of returns for e-commerce purchases was even higher, at 20.8%, but that figure did not increase over past years’ figures, NRF said. And online channels still account for less than a quarter of all sales, with e-commerce sales in 2021 accounting for $1.050 trillion of the total U.S. retail sales figure of $4.583 trillion.
According to a survey released today by NRF and Appriss Retail, the categories with the highest return rates were similar to 2020 metrics: auto parts (19.4%), apparel (12.2%) and home improvement and housewares (tied at 11.5% each).
But while the statistics show that high return rates are here to stay, they also show that many retailers are inefficient in handling the process in a profitable way. For example, one source of loss is fake returns: for every $100 in returned merchandise accepted, retailers lose $10.30 to return fraud, the study found.
In response, the researchers encouraged retailers to use the returns process as a way to connect further with customers and provide a positive experience. “Retailers must rethink returns as a key part of their business strategy,” Steve Prebble, CEO of Appriss Retail, said in a release. “Retail is dealing with an influx of returned items. Now is the time to stop thinking of returns as a cost of doing business and begin to view them as a time to truly engage with your consumers.”
In another measure of the challenge that retailers face, a separate survey found that 80% of retailers say that the cost of managing product returns is “significant to severe.” The major drivers of those spiraling costs were warehouse space and equipment costs (30% of respondents), followed closely by labor costs (26%), according to a recent ReverseLogix research study conducted with Lead to Market.
Companies surveyed said that automation could help reduce that cost, but that they were handcuffed by outdated technology, ReverseLogix, a Burlingame, California-based returns management system vendor, said in the report titled “Frictionless Returns: The Missing Piece of the eCommerce Experience.”
“Nearly three-quarters of respondents say that more automated returns management processes will improve employee and customer experiences, while helping to lower costs,” Gaurav Saran, CEO of ReverseLogix, said in a release. “This includes automated refunds for consumers, developing and optimizing multiple return channels, and automating processes for receiving, inspecting and processing.”
The survey found that the primary solutions used to manage product returns are warehouse management systems (WMS) at 30% and enterprise resource planning (ERP) systems (24%). Only 6% of respondents use the type of purpose-built, end-to-end returns management system that the firm suggests.
Retail returns increased to $761 billion in 2021 as a result of overall sales growth. https://t.co/HTOzHNxKuh pic.twitter.com/WjVskGG4Sd
— National Retail Federation (@NRFnews) January 25, 2022
According to our study released today, the cost of processing and managing product returns is out of control for #ecommerce retailers.
— ReverseLogix (@reverselogix) January 25, 2022
See what's driving costs and why most companies are failing to contain them...https://t.co/F883vqyQAc #reverselogistics #returns #retail
