Increase in returned items will mean ‘really great’ markdowns

Credit: DaytonDailyNews

Pretzel Fest & Popcorn Pizzazz still operates a store in the Kenwood Towne Centre.

Credit: DaytonDailyNews

Retailers are “in absolute shock” because so many items that people purchased in December and November are being returned in large numbers.

“No one’s ever, ever seen anything like this,” consumer expert Clark Howard said Tuesday during his daily podcast. “A lot of the items coming back esssentially have no value for the retailer. I’m seeing, as a result, clearance sales at prices that are ridiculous, especially on any kind of apparel.”

That, he said, is a “double whammy” for clothing retailers as spring items are already on the shelves and online.

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“This was the first Christmas season that a big chunk of clothing sales were online,” he said. “The return rates are stunning to everyone in retail on the online purchases.

The Financial Times reported that online purchases are being returned at three times the rate of in-store purchases, Clark said.

“Nobody’s math models accounted for that,” he said. “Retailers don’t even have places to store all the stuff so they’re renting trailer and renting warehouse space just to put all the returns.”

The large amount of items are overwhelming staff and slowing the rate of getting the items back out for sale, driving down values even more, Clark said.

That, he said, means January and February will be the biggest clearance months ever following a Christmas season with “really, really great” markdowns.

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Riley Dugan, a marketing professor at the University of Dayton who studies retail, said the massive amount of returns is “a very surprising trend.”

“The challenge for retailers is that January and February are always going to be their most difficult month because people are typically tapped out from the holidays and … the spring merchandise is coming in, so there’s really not enough floor space for any sorts of returns,” Dugan said. “That obviously poses a difficulty. It’s really the worst time of the year for this to happen.”

Dugan said increased returns could represent a combination of consumers’ fears of the economy “going south” and their attempting to return gifts for cash or a gift card so they can purchase something that better suits their own personal tastes.

UPS said on Jan. 2 it expected to process a record 1.9 million returns, up 26 percent from the highest rate in 2019. UPS spokeswoman Dawn Wotapka told this news outlet the shipping giants does not update that information following its release “for competitive reasons.” However, if those figures are on the mark, it would mean a seventh consecutive record.

That process, UPS said, is a change from years past, “when consumers would rush to physical retailers the day after Christmas and stand in long lines to make returns.”

Consumers now make purchases with returns in mind, and, according to a UPS study, 73 percent of online shoppers say the return experience affects their likelihood to buy from a retailer again.

Shoppers are forecast to return $41.6 billion in products purchased online this November and December, according to a report by commercial real estate services company CBRE. That figure is above a projection of $37 billion in 2018 and would set a new record.

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The CBRE report also said the overall returns rate in the retail space continued to grow at 10 percent annually. Total returns of purchases made online and in stores over the holidays are forecast to top $100 billion.

The retail industry loses $50 billion yearly due to inefficiencies in working with returns, according to the report, which also said there are “more than 10 billion needless shipments and touches.”

Some retailers have taken steps to ease the burden of returns. Kohl’s for example, announced last spring that it would start accepting returns for Amazon purchases at all of its 1,158 Kohl’s locations.

The department store retailer now accepts “eligible” Amazon items without a box or label. The retailer then packages the merchandise prior to sending it to one of the eCommerce retailer’s return centers.

Amazon expanded its free return program as the holiday shopping season came to a close.

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The company allowed shoppers to return, without charge, “millions of items” sold and fulfilled by Amazon including includes kitchen appliances, electronics and household items that weigh less than 50 pounds. Amazon previously only allowed free returns on shoes, bedding and apparel.

Items shipped by Amazon between Nov. 1 and Dec. 31, 2019, may be returned until Jan. 31 for a full refund, subject to return guidelines listed on its website.

The company has a “label-free and box-free” return program at nearly 6,000 locations, including Kohls, the UPS Store and some Whole Foods locations.

About 10 percent of goods sold in the United States go back to retailers every year, resulting in roughly $369 billion in lost sales, according to a 2018 report from Appriss Retail and National Retail Federation.

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