Skip to main content

Are Retailers Ready to Handle Huge Holiday Returns?

When the holiday rush finally peters out, retail is likely to have a massive returns problem on its hands.

More than half of consumers (52 percent) said they expect to return at least one gift they receive through an online merchant this holiday season, according to The 2022 Holiday Gift Returns Survey from e-commerce brand accelerator Phelps United.

But “at least” is the operative term here for many of these consumers. Among this group, 47 percent said they anticipate returning at three gifts at minimum, with nearly one in five (19 percent) saying they plan to return at least five and 6 percent expecting to return more than 10.

With returns becoming so commonplace, consumers are more likely to scrutinize the return policies of the online merchants they purchase with, according to the survey. More than three-fourths (76 percent) of respondents said they review an e-commerce store’s return policies before pulling the trigger on sending a gift.

Many said they would be more likely to shop at an online retailer in the future if it provided free shipping on returns (82 percent), a flexible window of 30 days or more for returns (58 percent) and a hassle-free or no-questions-asked return policy (52 percent).

The poll’s 600 respondents reported a household income of at least $50,000 and said they expected to receive gifts purchased through Amazon and other e-commerce sites this holiday season.

Related Stories

The results come as roughly 60 percent of retailers surveyed in an earlier study by reverse logistics company GoTRG said they’re making changes to existing returns policies, with fewer promising free returns. But the results from the Phelps United survey indicate that perhaps the threat of charging additional shipping or restocking fees, or reducing a returns window, isn’t going to help matters.

Retailers such as Gap, Old Navy, Banana Republic and J. Crew all have shortened their regular return windows to within a month, while sellers like Boohoo, H&M, Zara, Anthropologie, REI and L.L. Bean all added new fees this season for mailed returns.

“Americans expect to return gifts they receive via online retailers today,” said Adam Shaffer, president, Phelps United, in a statement. “It’s become such an intrinsic part of the holiday shopping experience that when retailers decide to tighten their policies, they risk leaving a negative impression—a bad aftertaste that may impact long-term brand perceptions. That’s why we recommend flexible return policies for online merchants.”

For 2021 overall, the return rate was about 16.6 percent of total U.S. retail sales, or $761 billion in returned goods, according to the National Retail Federation (NRF). But in 2022, as retailers are battling inventory issues and becoming significantly more reliant on markdowns, fewer businesses may be in a position to be able to afford such a hefty price tag.

In fact, 91 percent of brands reported that returns are accelerating faster than revenue generated, according to a study from Appriss Retail and Incisiv released in October.

And another reverse logistics provider, Optoro, reported that month’s returns processed through its operations leapt 74 percent from the 12 months prior, totaling 8.63 million units.

The Phelps United research indicated that 62 percent of consumers expect to return a gift because it is the wrong size or type; while 40 percent expect to return a gift because they already own that particular item. Another 28 percent said they would rather exchange it for something that better meets their needs and tastes, while 20 percent said a gift they don’t like simply has to go. Thirteen percent would rather exchange the gift for cash.

The gift respondents say they are most likely to send back clothing (71 percent), followed by shoes (53 percent) and gym wear (26 percent), further illustrating how apparel and footwear struggle to come up with ways to mitigate returns. Other top returned items include cosmetics (20 percent), kitchen appliances (20 percent), glassware (19 percent), candles (18 percent) and consumables such as sweets and chocolate (16 percent).

Although the majority of consumers (58 percent) prefer flexible return policies that allow 30 days or more, most of respondents prefer to return products quickly and in as little time as possible.

Sixty-nine percent of respondents said they plan to return gifts in the first week after Christmas, with nearly a third saying they would return gifts as soon as the day after Christmas (15 percent) or even before Christmas (15 percent).

While most respondents (60 percent) said they expected the returns process would take an hour or less for them to return gifts, 40 percent said it would take at least two hours, with 11 percent saying bracing for a four-hour ordeal.

Nearly two-thirds of respondents (65 percent) said they would prefer to return gifts to a physical store, compared to those who would rather return gifts through the mail (35 percent).

Overall, gift receipts appear to be popular among gift-givers. As many as 85 percent of consumers say they include them in the gifts they send, and 79 percent saying they are typically included in the gifts they receive.