This year’s holiday shopping is predicted to hit all-time highs. However, an increasing portion of those purchases will be returned.
According to a recent analysis by the National Retail Federation and return management business Happy Returns, returns are predicted to account for 17% of all merchandise sales in 2024, or $890 billion in returned products. This is an increase from a return rate of almost 15% of all retail purchases in the United States in 2023, which amounted to $743 billion in returned products.
The NRF also discovered that while returns occur all year round, they are far more common over the holidays. Retailers anticipate an average return rate for the holidays that is 17% higher than the yearly figure as shopping peaks in the coming weeks.
According to Amena Ali, CEO of Optoro, a company that provides returns solutions, “ideally there is a world in which you can reduce the percent of returns,” but the issue won’t go away anytime soon.
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Why returns are a big problem
Customers were more used to their purchasing and return practices as a result of the pandemic’s impact on internet shopping, and more people started placing orders for items they never planned to retain.
According to Happy Returns, over two-thirds of buyers now purchase many sizes or colors, some of which they subsequently return—a behavior known as bracketing.
According to a different Optoro research, 69% of consumers acknowledge wardrobing, which is the practice of purchasing an item for a certain occasion and then returning it later. That represents a 39% rise over 2023.
According to Optoro, 46% of customers reported returning items frequently each month, a 29% increase from the previous year, largely as a result of these kinds of actions.
The cost of all that back and forth is high.
Happy Returns co-founder and CEO David Sobie stated in a statement that merchants need to reconsider reverse logistics because practices like bracketing and increasing return rates are taxing established systems.
What happens to your returns
Retailers must pay 30% of the item’s original price on average to process a return, according to Optorofound. Returns, however, affect more than simply the bottom line of merchants.
Spencer Kieboom, the founder and CEO of the return management company Pollen Returns, says that returns frequently do not make it back into the shelf, which also presents problems for shops trying to improve sustainability.
Even more carbon emissions are produced when things are returned to be repackaged, replenished, and occasionally sold abroad, presuming they can be put back into use.
Only 54% of all packaging was recycled in 2018, the most current data available, and some returned goods are shipped directly to landfills, according to the U.S. Environmental Protection Agency.
According to Optoro, returns generated 8.4 billion pounds of landfill garbage in 2023.
According to Rachel Delacour, co-founder and CEO of Sweep, a sustainability data management company, it poses a significant issue for retailers in terms of both the environmental effect of handling those returns and the lost revenue. Being sustainable is ultimately a business plan.
As a result, businesses are making every effort to limit returns.
According to another Happy Returns research, 81% of U.S. merchants implemented tougher return policies in 2023, such as reducing the return window and imposing a return or restocking charge.
Retailers stated that enhancing the returns experience was a top priority for 2025, even though restocking and shipping costs might assist reduce the quantity of product that is returned.
Currently, 33% of merchants, such as Amazon and Target, give their consumers the option to keep the item and receive a refund without having to return it.
To keep products in circulation, some are attempting buyback schemes. In 2017, the online Worn Wear reselling scheme was introduced by Patagonia. Since then, a lot more people have followed suit, including Coach, Levi Strauss & Co., J. Crew, and Neiman Marcus.
For resale at Ikea stores, some Ikea locations even buy back used furniture. Additionally, there is Amazon Renewed and Walmart Restored.
Returns are marked down and sold as secondhand by other merchants to companies like Play It Again Sports, Plato’s Closet, and Once Upon a Child.
Optoro’s Ali stated, “You need a solution that addresses all of the above.”
How return policies shape shopping habits
According to Happy Returns Sobie, return policies and expectations are becoming a more significant indicator of consumer behavior, especially for millennials and Generation Z.
According to Sobie, return policies are influencing younger generations’ purchasing habits from the outset and are no longer only a post-purchase concern.
According to the NRF, 67% of consumers believe a bad return experience will deter them from making another purchase from a store, and 76% of consumers say free returns are an important consideration when choosing where to spend their money.
According to a GoDaddy poll of 1,500 Americans, 77% of consumers look up the return policy before making a purchase.
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