It looks like it could be an expensive holiday for retailers this season.
According to new data from commercial real estate firm CBRE and return logistics company Optoro this week, the average holiday return will cost retailers two-thirds of the original price for the item when factoring in labor, transportation, and warehousing costs.
Although many customers expect free returns, the cost is significant for retailers. Optoro estimates that, on average, it costs $33 or 66% of the price of a $50 item for retailers to process a return—up from 59% last year.
As the National Retail Federation (NRF) forecasts a 13% year-over-year increase in 2021 holiday online sales to $222.3 billion, CBRE Supply Chain estimates that at least 30% or $66.7 billion worth of holiday purchases will be returned, also up by 13% year-over-year and by 45.6% over the previous five-year average.
CBRE and Optoro believe that these dramatic numbers are due to many consumers beginning their holiday shopping earlier than normal this year in fear of retailers running out of inventory due to supply chain disruptions. A recent survey by Optoro found that 41% of consumers planned to shop earlier this year than last, meaning retailers are more likely to see returns sooner than usual.
Higher returns numbers also come as major retailers are facing increasing logistics costs to make those sales in the first place. CBRE estimates that logistics now cost 12% of sales for these large retailers with growing e-commerce businesses, compared to just 6% for more traditional retailers.
CBRE and Optoro also noted that returns pose a significant environmental issue due to the use of more packaging and transportation. Returns produced 5.8 billion pounds of waste and 16 million metric tons of CO2 emissions in 2020, according to Optoro.