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Retailers’ average return rate jumps to 16.6% as online sales grow

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Miami, Doral IKEA Exchange and Returns Elevators

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Shoppers are returning more clothing, shoes, and other items to stores as they shop online during the pandemic.

According to Appriss Retail’s Tuesday survey, retailers are expected to return 16.6% on average of total merchandise purchased by customers in 2021. This is a significant increase from the 10.6% average return rate in 2020.

This amounts to over $761 billion in merchandise according to the survey which was based on responses by 57 retailers from mid-October through mid-November.

Returns tend to be higher when consumers buy online — a mode of shopping that makes it easy to toss items into the virtual basket, but hard to visualize how they will look or fit in person. NRF estimates that online sales represented 23% to $4.583 trillion worth of U.S. retail sales by 2021. Companies are faced with the dilemma of whether to resell unwanted items or get the item written off.

The average rate of returns for online purchases was 20.8% — an increase from 18.1% last year, NRF found.

Mehmet Sekip Alug, an associate business professor at George Mason University said in the past that retailers had a tendency to forget what occurred after the sale.

“Online sales are increasing, and so the return rates have also increased substantially. I don’t think that it’s a secondary problem any longer,” he stated.

Warby Parker, a direct-to-consumer brand like Warby Parker has opened stores where customers can view the items in person and not rely on images from the website. Other retailers encourage customers to return an online purchase to a store by waiving fees — with the hope of enticing them to buy something else.

Expect higher holiday returns. The survey revealed that retailers expected 17.8%, or $158 billion, of the merchandise they sold between November and December, to be returned. Holiday sales grew 14.1% year over yearThe trade group reported that the record reached $886.7 trillion.

There are some categories that generate higher returns than others. This year’s survey shows that auto parts are the most profitable with an average return rate 19.4%. This is followed closely by apparel, which has an average return rate 12.2%. The average tie for home improvements and housewares is 11.5%.

Some retailers have found that the returns problem has inspired them to acquire new products and approaches. Walmart bought virtual fitting room start-up, ZeekitFor an unspecified amount, Best BuyIt has an online store that sells TVs, open-box appliances and other products. All of these items are warranted. These are just a few of the many other options, which include AmazonThey offer refunds, but advise customers to return items instead of dealing with shipping and handling a heavy, customized or low-value item.

Tony Sciarrotta is the executive director at Reverse Logistics Association. He said that customers want retailers to offer generous returns policies. However, these can encourage shoppers to order more, like a number of dresses in different colors or sizes. He said that a high percentage of returns could cause retailers to lose profits and make it difficult for them to meet sustainability goals.

He said that savvy retailers have been paying greater attention to the returns and testing strategies in order to reduce the volume of e-commerce, such as 3-D images and artificial intelligence-powered tools, which can help suggest the size.

Fraud can also be a possibility with returns. NRF determined that every $100 worth of merchandise returned by retailers is subject to $10.30 fraud.

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