Returns are becoming more of a headache for retailers.
According to a new report released on Wednesday by the National Retail Federation (NRF) and data science company Appriss Retail, retailers expect more than $761 billion in merchandise sold last year to be returned by consumers. This accounts for an average of 16.6% of total U.S. retail sales, which soared to $4.583 trillion in 2021, the report said.
The overall number is up from 2020, which saw a total return rate of 10.6% during the height of COVID-19.
Still, online returns in 2021 are in line with recent years at an average of 20.8 percent. According to NRF, online sales accounted for $1.05 trillion of total U.S. retail sales last year. Approximately $218 billion of online purchases were returned, with $23.2 billion deemed fraudulent.
According to the survey, for every $1 billion in sales, the average retailer incurs $166 million in returns. It also found that for every $100 in returned merchandise accepted, retailers lose $10.30 to return fraud. The categories with the highest return rates were similar to 2020 metrics: auto parts (19.4 percent), apparel (12.2 percent) and home improvement and housewares (tied at 11.5 percent). The most common types of payment used during the original purchase that led to a return were credit cards (22.78 percent), cash (12.69 percent) and debit cards (7.04 percent).
“As total retail sales continue to accelerate from sustained consumer demand during the pandemic, it is no surprise that the overall rate of returns has also been impacted,” said Mark Mathews, NRF’s VP of research development and industry analysis. “While retailers have indicated that they are seeing an increase in items returned to stores and online, the upside is that it also provides them with additional opportunities to connect further with customers and provide a positive experience.”
This report comes after the NRF reported earlier this month that retail sales during the November and December holiday season reached a total $887 billion, exceeding its forecast of up to 11.5% growth. On average, retailers expect 17.8%, or $158 billion, of merchandise sold during the holiday timeframe to be returned.
A separate December report from commercial real estate firm CBRE and return logistics company Optoro found that the average holiday return would cost retailers two-thirds of the original price for the item when factoring in labor, transportation, and warehousing costs. CBRE estimated that at least 30% or $66.7 billion worth of holiday purchases would be returned.