Next up for retailers: A big wave of gift returns

FILE PHOTO: A woman takes pictures of the Christmas window at the Macy’s Herald Square store in New York City, New York, U.S., November 20, 2020. REUTERS/Eduardo Munoz

NEW YORK — As shoppers tuck their final Christmas presents under the tree, U.S. retailers are bracing for a record-setting flood of returns of online gifts bought during the deadly surge in coronavirus cases.

To make the process more efficient, retailers including Walmart Inc and Target Corp let shoppers drop unwanted gifts at FedEx or United Parcel Service drop-off sites.

Others, including Best Buy, Dick’s Sporting Goods and Nordstrom, are offering curbside returns for the first time as efforts to stop the spread of COVID-19 have shuttered stores or reduced the number of customers allowed inside.

Returns are set to swell this year. Shoppers seeking to avoid contagion shifted from stores to online – where return rates are historically higher. Retailers also are under pressure to make the process as seamless as possible for the shoppers they want to retain as longtime customers as well as for UPS and FedEx, which are inundated with packages.

Even some shopping malls are moving to make returns easier for their tenants. Mall of America and Simon Property Group have both partnered with Narvar, a returns management provider, to eliminate the need for shoppers to print return labels for packages they drop off.

The National Retail Federation expects 2020 holiday sales to jump as much as 5.2% from last year to $766.7 billion. Roughly 13% of merchandise, or about $101 billion worth of goods, sold during the 2020 holiday season will be returned, the trade group said.

Optoro, which helps retailers sort, resell, and dispose of returned merchandise, puts the number even higher. It predicts that 2020 U.S. holiday returns will hit $115 billion between Thanksgiving and the end of January. That is up 15% from the 2019 prediction issued by the firm, which counts UPS and home furnishing retailer IKEA among its investors.

The in-store apparel return rate is 5-8%, while online runs around 30%, said Rob Zomok, president of global operations at Inmar Intelligence, which processes roughly 600 million retail and e-commerce returns annually.

“That math has created a significant increase in returns,” said Zomok, who added that apparel returns are at a record high.

“When your shopping is 100% online, you’re probably ordering a couple extra (items) with the intent of returning,” said Sriram Sridhar, chief executive of LateShipment.com, which helps clients track packages.

“We expect every retailer to face around 50% more returns than they have faced in the years past during the holiday season,” Sridhar said.

What’s more, retailers also quarantine or sanitize products after they are returned to ensure they are free from the virus.

“This is not the typical way returns are processed,” said Paula Rosenblum, managing partner at retail research firm RSR Research. Kohl’s, which collects Amazon.com returns and sends them in bulk back to e-tailer, has extended its own deadline for premium electronics.

It joins a swath of retailers, including Walmart, Macy’s and Amazon, who are giving shoppers more time to return purchases – a move that could make it harder to resell seasonal merchandise. Getting those products turned around for resale is vital – particularly for fast-fashion retailers who sell trendy apparel, Inmar’s Zomok said.

“The window is going to be short,” Zomok said.