After the holidays, there is another seasonal rush to stores — for returns.
Last week, the chain of seven Games by James stores in Minnesota and Wisconsin kept busy with sales of people returning products, using gift cards or spending holiday cash, said owner Logan McKee.
“We definitely see it as an opportunity to do business again … where they are just as happy with a return as they are with a sale,” McKee said.
About $1 in every $8 worth of holiday merchandise was returned after the 2020 holiday season and some analysts anticipate the amount of returns to rise as the 2021 holiday period draws to a close.
Retailers put most of their time and money getting things into the hands of customers. But they’re also putting more energy into handling returns, hoping to save money and score with customers.
“A lot of the innovation that we saw in getting product to customers … that’s not the same for the reverse supply chain,” said Kyle Goldschmidt, an assistant professor in the Department of Operations and Supply Chain Management at the University of St. Thomas. “It’s always been this laborious, slow process. You are starting to see a lot more innovation there.”
It was easy to group shoppers at Ridgedale Center in Minnetonka on the Monday after Christmas. There were people with no shopping bags walking laps for exercise. There were others on break from school or work leisurely perusing the after-holiday sales. And then there were the returners, walking hurriedly with packages and determined faces.
“We were on a mission,” said Julie Hansen, as she walked through the mall with her son Elijah, both tucking plastic online shipping bags under their armpits.
Hansen had bought the clothes online for her son for the holidays, but they didn’t fit. Elijah Hansen estimated he had returned more items this year because more of his gifts were bought that way.
John Duffy of Minneapolis took the escalator to return athletic apparel for his wife after already returning some shirts he received as gifts.
“My wife does the shopping; I do the returns,” Duffy joked.
Games by James, which has a location at Ridgedale Center, launched an end-of-year sales promotion after Christmas. As a result, McKee said, many of the people who have holiday returns still walk out of the store with something.
“Most of the people that come in right away are doing exchanges,” he said. “There’s something else that they want.”
Stores keep most games for a week before putting them back on the shelves. When hot-ticket items like Funko Pop! figures and Pokemon cards are returned, Games by James staffers work quickly to sanitize them and put them back out for sale.
About 11% of U.S. retail sales were returned last year, or nearly $430 billion worth of stuff, according to the National Retail Federation (NRF). During the holidays, returns bump up to more than 13%. Online returns for the year more than doubled last year compared to 2019 and were a major driver of the overall growth of returns, according to the NRF.
“I see returns continuing to be more problematic,” Goldschmidt said. “Online shopping is growing. Returns continue to grow just because of the behaviors associated with it. If you are trying to buy a shirt, a lot of people purchase two sizes and keep the one that fits and return the other one. There’s a lot of waste involved with that.”
Returns can end up costing retailers a lot in lost revenue. On average, it costs $33 for retailers to process a returned item, according to Optoro, a reverse logistics company that lists Best Buy and Target among its clients.
“Most consumers think that returns are simply returned to shelves. In reality, it’s much more complicated,” Casey Chroust, a senior vice president for Optoro, said in an e-mail. “Returned goods have many hidden costs, including transportation, warehousing, refurbishment and liquidation. And many goods are never resold at full price. Retailers are not only losing out on the sale from the returned good, but also incurring huge costs in processing that return.”
Despite the costs, returns represent a customer service opportunity to retailers, Katherine Cullen, NRF’s senior director of industry and consumer insights, said in an interview.
Many customers who return items to a particular retailer usually also purchase a lot of products so there’s the chance during a return to deepen store loyalty, Cullen said. Most holiday shoppers also prefer to return unwanted gifts in a store, which gives retailers a chance to interact with them, she said.
“A positive return experience can encourage a consumer to come back,” Cullen said.
The return experience has improved during the pandemic. For instance, some have turned to third-party drop-off spots, including other retailers. Customers can even bring unpackaged items and have them returned with just the use of a QR code.
In early 2021, Optoro rolled out Express Returns, a nationwide network of packageless return drop-off points, including more than 1,000 Staples stores.
Amazon.com, which has been partnering with Kohl’s to allow drop-off returns, added more capability in 2020 by allowing more than 500 of its Whole Foods Market grocery stores to take returns with no box or label.
The supply-chain issues making it harder to get products to the United States from overseas have also pushed companies to more quickly get returned items back on shelves to alleviate inventory problems, Goldschmidt of St. Thomas said.
Minneapolis-based customer experience company Calabrio helps companies including outdoor clothing retailer Patagonia manage their service agents and analyze the calls they get at their customer service centers, including when customers call about returns.
“If they are on the phone that means something has gone wrong,” said Tom Goodmanson, president and chief executive of Calabrio. “The best in class [retailers] will be taking this opportunity to listen to the customers and find out where they went wrong.”
Some retailers occasionally allow customers to keep items instead of returning them, a move that can mitigate costs and leave customers with a favorable impression.
Ultimately, returns are a byproduct of demanding consumers that don’t think about how their retail appetites contribute to environmental waste, Goldschmidt said.
Returned inventory creates 5.8 billion pounds of landfill waste each year, according to Optoro. It is standard belief in logistics circles that about 25% of returns are discarded.
“I think that the best way to change some of these consumer behaviors is just make them aware of it,” Goldschmidt said. “If customers are aware that when they purchase two shirts one of them is going to end up in a landfill, it might change their purchasing behavior.”