What: US retail returns surge to US$890 billion as consumers increasingly expect seamless return processes.

Why it is important: This unprecedented level of returns is reshaping retail operations, with two-thirds of retailers now charging for returns while balancing customer satisfaction.

The National Retail Federation's latest data reveals an unprecedented surge in consumer returns, reaching USD 890 billion and accounting for nearly 17% of total annual sales. This dramatic increase has prompted retailers to implement significant operational changes, with two-thirds now charging for at least one return method. The challenge is particularly acute during the holiday season, where return rates are projected to be 17% higher than the annual average. Retailers are responding with multi-faceted strategies, including partnering with third-party service providers and hiring additional seasonal staff specifically for returns processing. David Sobie, Happy Returns' CEO, emphasises that return policies now influence purchasing decisions from the outset, especially among younger consumers. The situation is further complicated by online shopping trends and economic pressures, with GlobalData's Neil Saunders noting that financially constrained consumers are less likely to keep uncertain purchases. Despite the costs and operational challenges, retailers must maintain customer-friendly return options, as three-quarters of shoppers consider free returns crucial for e-commerce transactions.

IADS Notes: The retail industry's returns challenge has escalated dramatically, as evidenced by the jump from US$743 billion in returns reported in January 2024 to the current US$890 billion figure. This 19.8% increase aligns with findings from September 2024 showing that 39% of consumers return online purchases monthly, with each return costing retailers US$25-30. The industry's response has been decisive, with research from August 2024 documenting a widespread shift away from no-questions-asked policies, explaining why two-thirds of retailers now charge for at least one return method. However, March 2024 studies suggest that return fees alone have not effectively deterred returns, supporting the NRF's prediction of a 17% higher return rate for the 2024 holiday season. This trend has pushed retailers toward more comprehensive solutions, including enhanced third-party partnerships and seasonal staffing strategies.

National Retail Federation reports USD 890 billion refunding problem