Retailers brace for bigger holiday returns season

Bricks-and-mortar outlets refine their in-store handling of returns as surging e-commerce sales push more goods into burgeoning reverse logistics networks

By Jennifer Smith | Dec 19, 2019

Shoppers may love ordering stuff online, but when it comes to returning that holiday sweater, many would rather drop it off at the store.

That consumer aversion to shipping back unwanted goods could give bricks-and-mortar retailers an edge in the post-holiday hangover even as online sales continue to soar.

Consumers are expected to return between $90 billion to $95 billion worth of merchandise purchased over the holidays, according to B-Stock Solutions, which runs online liquidation sites for major retailers. That is a projected jump of 15% to 20% over 2018, and e-commerce orders are likely to account for nearly half of this year’s volume.

Many of those rejects will get dropped off at the sales counter as store owners refine their ability to handle consumer returns. For retailers, that can mean another crack at landing a sale.

“It’s a qualified customer walking in the door with what amounts to a gift card,” said Bryan Eshelman, a managing director in the retail practice at consultants AlixPartners LLP.

Some 39% of U.S. online shoppers “often return items directly to a store,” according to a 2019 survey by United Parcel Service Inc. The package carrier forecasts consumers will return more than one million e-commerce packages a day through its network this month, with volume spiking the week before Christmas and peaking on Jan. 2 at an estimated 1.9 million packages.

Big-box stores like Target Corp. and Walmart Inc. are increasingly allowing shoppers to return online orders at stores, while Walgreens Boots Alliance Inc. and Nordstrom Inc. are testing pickups and returns of orders from other brands and retailers. Some mall chains and specialty retailers charge customers for return shipping, Mr. Eshelman said, but allow in-store returns at no charge to drive more traffic.

About 80% of shoppers prefer returning or exchanging items in stores, and nearly three-quarters say they are likely to buy something else in the process, according to a National Retail Federation survey released this week.

Catering to those customers is becoming more important as businesses look for ways to blunt the costs of what is known as reverse logistics. Some unopened items may be put back onto store shelves, but many end up being liquidated through online auctions and other secondary channels.

Generous return policies at Amazon.com Inc. and big-box retailers are also reshaping consumer expectations.

“Every year these policies get more and more liberal,” said Norman Brouillette, vice president of operations for Ryder System Inc.’s supply chain division, whose customers include retailers. “What we’re hearing from our customers is they are expecting to see a significant increase this year in returns” as e-commerce sales grow.

The stakes are particularly high for clothing and shoe companies. Shoppers routinely order multiple items online, try them on at home and send back items that don’t fit. E-commerce orders can have about triple the return rate compared with in-store purchases, said Tobin Moore, chief executive and co-founder of Optoro Inc., which helps retailers manage and process returned items.

Shoppers also factor return policies into buying decisions. Some consumers prefer in-store returns because they get faster refunds, according to a 2019 consumer survey by Narvar Inc., a digital-retail software and technology company. Nearly a quarter of respondents say that having to repackage an item is one reason they dislike the returns process.

“People expect ultimate convenience, and packing tape and packaging is annoying,” Optoro’s Mr. Moore said. “Having to have a printer, if you have to print out a label, that’s also a hassle.”

Even e-commerce merchants are coming up with more ways for consumers to return digital purchases to physical locations.

Amazon offers no-cost returns at more than 18,000 drop-off locations that include its small chain of physical book stores, select Whole Foods Markets and third-party locations such as Kohl’s Corp. and UPS stores.

Santa Monica, Calif.-based startup Happy Returns has built its business on handling in-person returns for digital brands such as Everlane and Rothy’s at more than 700 kiosks in malls and stores around the country.

Write to Jennifer Smith at jennifer.smith@wsj.com

Article was originally published here.