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Retailers grapple with returns as online sales surge

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A UPS package handler loads a vehicle.

Consumers will return $120 billion worth of products between Thanksgiving and the end of January, according to Optoro. Above, a UPS package handler loads a truck. Jon Cherry via Getty Images

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With a boom in online shopping during the pandemic and the holiday season comes a boom in online returns.

Optoro, which manages returns for companies like Target, Ikea and American Eagle, says consumers will return $120 billion worth of goods between Thanksgiving and the end of January. It’s an expensive process for retailers that’s become an even bigger problem with rising shipping costs and fewer workers to process returns.

Maybe your grandparents or in-laws gave you an ugly sweater this month. Lucky you. If you bring it back to the store, it’s easy for the retailer. You do the legwork and they put it on the shelf.

“Now if it’s an item that you buy online, the vast majority of them actually don’t go back to shelf,” said Tobin Moore, CEO of Optoro.

Online returns take up to two months to go back into inventory, Moore said. By then, that ugly sweater is out of season. So it’s put on clearance, sold to a reseller or “they’ll just toss it because that’s the most economical solution for them,” he said.

As online shopping grows, so does the returns problem because more people are using their bedroom as a dressing room, according to David Sobie, co-founder of Happy Returns, a software and logistics company. More than 30% of online apparel purchases are sent back.

“We’ve all probably experienced buying multiple sizes of something with the intent of returning the item that doesn’t fit best,” Sobie said.

It’s why more retailers are using services like Happy Returns, which hosts drop-off locations to batch items and cut down on shipping costs and time. Other strategies include increasing product prices, adding restock fees or letting customers keep the items because it costs less.

There’s no perfect fix, said Sucharita Kodali, a retail analyst at Forrester.

“It’s just sort of one of the things you have to do to be competitive in the retail world,” she said.

Though the cost of online returns to the retailer is high, Kodali said, the value of that service to the customer is even greater.

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