The issue of retail returns: An $890 billion challenge.

• According to a report by the National Retail Federation and Happy Returns, returns in 2024 are projected to be approximately 17% of all goods sold, totaling $890 billion, which is an increase from 15% in 2023.
• The increasing return of merchandise poses significant difficulties for retailers, as well as having a negative impact on the environment.

This year, it is predicted that holiday shopping will reach unprecedented heights. However, an increasing proportion of those purchases will be returned.

According to a report by the National Retail Federation and return management company Happy Returns, returns in 2024 are expected to amount to 17% of all merchandise sales, totaling $890 billion in returned goods. This is up from a return rate of about 15% of total U.S. retail sales, or $743 billion in returned goods, in 2023.

During the holiday season, returns are more common than at any other time of the year, according to the NRF. Retailers anticipate that their holiday return rate will be 17% higher than their annual average as shopping peaks in the weeks to come.

"Amena Ali, CEO of Optoro, stated that she hopes for a world where the percentage of returns can be reduced, but she acknowledged that the problem will not improve anytime soon."

Here are the last days to ship a holiday package.

Why returns are a big problem

During and after the pandemic, online shopping became more popular, and customers became more comfortable with their buying and returning habits, leading to an increase in the number of shoppers ordering products they never intended to keep.

According to Happy Returns, approximately two-thirds of consumers now purchase multiple sizes or colors and subsequently return some of them, a practice referred to as "bracketing."

A report by Optoro found that 69% of shoppers admit to buying an item for a specific event and returning it afterward, which is a 39% increase from 2023.

According to Optoro, a 29% increase in the return of goods has been observed among consumers, largely due to certain behaviors.

All of that back-and-forth comes at a hefty price.

Retailers must reevaluate their reverse logistics strategies due to the pressure from behaviors such as bracketing and increasing return rates, according to David Sobie, Happy Returns' co-founder and CEO.

What happens to your returns

Optoro discovered that processing a return costs retailers an average of 30% of an item's original price. However, returns are not only a financial issue for retailers; they also pose a challenge to their bottom line.

Retailers face challenges in enhancing sustainability when often-returned items do not end up back on the shelf, as stated by Spencer Kieboom, founder and CEO of Pollen Returns, a return management company.

Repackaging, restocking, and reselling returned products can result in additional carbon emissions, especially if they are sent overseas.

According to the U.S. Environmental Protection Agency, only 54% of all packaging was recycled in 2018, and returned goods are often sent straight to landfills.

According to Optoro, 8.4 billion pounds of landfill waste was created in 2023.

Rachel Delacour, co-founder and CEO of Sweep, stated that managing returns presents a significant challenge for retailers, not only in terms of lost revenue but also in terms of environmental impact. She emphasized that sustainability is a crucial business strategy.

Companies are taking measures to minimize returns.

In 2023, 81% of U.S. retailers implemented stricter return policies, such as shortening the return window and charging a return or restocking fee, according to a report from Happy Returns.

Retailers aim to enhance the returns experience in 2025, in addition to reducing inventory sent back through restocking fees and shipping charges.

Retailers, including Amazon and Target, are now offering a refund without requiring customers to return the product, with 33% of retailers adopting this policy.

Some companies are implementing buyback programs to keep goods in circulation. In 2017, Patagonia launched its online Worn Wear resale program. Since then, J.Crew, Neiman Marcus, Coach, and Levi Strauss & Co. have also followed that lead.

Ikea stores buy back used Ikea furniture for resale. Additionally, Walmart Restored and Amazon Renewed offer similar services.

Businesses such as Once Upon a Child, Plato's Closet, and Play It Again Sports purchase returns from other retailers and sell them as secondhand, marking them down.

"You need an all-of-the-above solution," said Optoro's Ali.

How return policies shape shopping habits

According to Happy Returns' Sobie, consumer behavior is increasingly influenced by return policies and expectations, particularly among Generation Z and millennials.

"From the start, younger generations are considering return policies when shopping," Sobie said.

According to the NRF, 76% of shoppers consider free returns a crucial factor when deciding where to spend their money, while 67% say a negative return experience would deter them from shopping with a retailer again.

According to a survey of 1,500 adults conducted by GoDaddy, 77% of shoppers examine the return policy prior to making a purchase.