Holiday Hangover - UPS Expects 15% Surge In "Dirty Business" Of Xmas Gift Returns

United Parcel Service (UPS) expects to handle four million returns the first full week of January, up 15% from two years ago. As online sales continue to grow, returns "represent a larger percentage of overall sales." As WSJ reports, more than 20% of returns happen during the holiday season - representing $60 billion in merchandise. While returns may be a boon for delivery companies, they are costly for retailers as returns, replacements and damaged goods represent about 10% of revenue. With return rates as high as 50%, one manager explains "'returns' is just a dirty business... Retailers are really losing their shirts on it."

 

More than 20% of returns happen during the holiday season—about $60 billion in merchandise, according to Optoro, a logistics provider.

The U.S. Postal Service handled 3.2 million returns in the two weeks that followed last Christmas and said there will be even more this year. United Parcel Service Inc. expects to handle four million returns the first full week of January, up 15% from two years ago as online sales continue to grow.

Returns may be a boon for delivery companies, but they are costly for retailers. Best Buy Co. (BBY) estimates that returns, replacements and damaged goods represent about 10% of revenue and for the year cost the electronics retailer $400 million. The chain is trying to reduce those losses by selling more so-called open-box inventory online and at its stores around the country. Hudson’s Bay Co. (HBC.CA), which owns Saks Fifth Avenue and Lord & Taylor, has tried to encourage customers to return products to its stores, so it can try to land another sale in the process.

“Returns—it is just a dirty business,” said Frank Poore, chief executive of logistics platform CommerceHub, which connects manufacturers with major retailers to fill online orders.

Last January, some retailers were surprised by the high number of returns, said Bala Ganesh, retail-segment marketing director at UPS. Mr. Ganesh said some retailers had as many as 30 trailers full of returns sitting outside their distribution centers waiting to be processed.

“Retailers are really losing their shirts on it,” said Tobin Moore, Optoro’s CEO. “As the returns rate increases, more retailers are paying attention to it.”

In addition, 62% of consumers said they had returned an item bought online in 2014, compared with 51% in 2012.

The return rate for online purchases is about three times as high as for items bought in stores, where shoppers can try on and test their choices. UPS’s Mr. Ganesh said that some high-end apparel retailers have return rates as high as 50%.

The holidays are the real crunch-time for returns, said co-founder Matt Watson. “If you don’t manage to sell them in season, they might not sell at all.”

It's the thought that counts... and before the credit card bill arrives, it looks like returns will make retail sales this holiday look even less exciting than they already are.

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