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Consumers Slated to Return Nearly $900 Billion of Merchandise in 2024
Meghan Hall
5 min read
Retailers continue to struggle against an age-old issue: returns and reverse logistics.
New data from the National Retail Federation (NRF) and Happy Returns, a UPS-owned company partnered with retailers to streamline returns, shows that this year alone, retailers will see $890 billion in returns, equivalent to nearly 17 percent of their total annual sales.
And as consumers’ return rates continue to increase and e-commerce remains a vital part of many shoppers’ lives, they have come to expect a certain level of flexibility around the returns process. This year, retailers began to pump the brakes on unlimited, unchecked free returns, the data shows.
Three-quarters of shoppers said free returns remain an important consideration for e-commerce transactions. But the days of free returns may be in question for many retailers, two-thirds of whom indicated that they started charging for at least one of the return methods they offer this year.
The primary reason for those added consumer costs, they said, has been increased costs to process returns and increased costs for carrier shipping. David Sobie, CEO and co-founder of Happy Returns, said he believes charging for certain forms of returns may be the only way to offset a growing annual average return rate.
Part of the reasons for growing expense, he speculates, is labor costs.
“Labor has gone up. We employ people in our warehouses, and we compete with every other warehouse in the area where our warehouses are. It’s all the usual suspects. If you go to our Valencia, California, warehouse, there’s an Amazon facility less than a mile away; there’s a Home Depot facility. They’re doing the same kinds of things, and so if one of them raises their wage, we have to respond,” Sobie said.
Sobie also noted that logistics players are seeing the cost of renting their warehouses increase.
Retailers have been seeing mixed results when it comes to the side effects associated with charging for returns. Six in 10 retailers said they have seen an increase in the proportion of shoppers selecting a free return method rather than a paid return method, but nearly half of retailers saw a decrease in average order value after starting to charge for returns.
If they can’t figure out how to offer customers free returns, retailers may have to get creative in other ways; two-thirds of consumers noted that, if they have a poor experience returning an item, they aren’t as likely to make repeat purchases with that retailer. In a retail environment where retaining customers remains both difficult and necessary, giving shoppers perks and flexibility remains a boon.
Incentivizing in-person returns has become a popular option among consumers, 66 percent of whom said they would be more likely to return an item purchased online at an in-person location if they received an immediate refund when dropping it off. Similarly, 65 percent of consumers noted that they would be more likely to return items in person if they could do so without a shipping box or label.
However, consumers’ interest in in-person returns drops quickly when factoring in longer travel times; while 62 percent of consumers said they would travel five miles or fewer to return an item without a box or label, that figure dropped to 26 percent when asking them about a returns location 5.1 to 10 miles away from their home.
How retailers offer returns may see customers putting them on their naughty or nice lists for the holiday season.
Six in 10 consumers said they were more likely to consider retailers’ return policies during the holiday period, with Gen Xers and Baby Boomers outpacing that average and Gen Zers and Millennials coming in with lower figures.
Even as retailers work to make returns and e-commerce more viable and flexible, they continue to struggle against returns fraud or policy abuse. More than half of retailers surveyed said they observed an increase in each of the following behaviors in 2024 as compared with 2023: employee return fraud, packages returned with rocks or “other non-related items,” returns made by organized retail crime groups, wardrobing, returns using counterfeit receipts, returns of shoplifted merchandise and more.
Consumers themselves said they’ve participated in what NRF and Happy Returns call “abusive or exploitative consumer returns behaviors.” Self-admitted instances of those behaviors are higher among younger generations than their older counterparts. For instance, five in 10 Gen Zers and four in 10 millennials admitted to wardrobing, the practice of returning a worn item. Three in 10 Gen Xers and one in 10 Baby Boomers said they had done the same.
Those may be troubling statistics, particularly for the 93 percent of retailers stating that retail fraud has posed a significant issue for their businesses. But Sobie said part of the reason for the increase could be the fact that technology has enabled a greater proportion of retailers to think about return abuse and fraud as part of their day-to-day operations.
“People are just more aware and are actually managing [those issues]. Maybe it was sliding through before, and now they’re aware,” he said.
But box-free, label-free returns could help mitigate issues of return abuse.
“I think mentally, if [consumers] have to interact with a human being, [they’re] less likely to do something fraudulent, than if [they’re] just sticking it in a box and mailing it off,” he explained.
Identifying instances of that kind of behavior, coupled with increased costs and an uncertain political environment that could impact the logistics industry heavily has caused retailers to reconsider their reverse logistics processes. Two-thirds of retailers surveyed said they will make upgrading their returns capabilities a priority in the first half of 2025.
Sobie said that figure is promising.
“To me, that [figure] was super encouraging…The vast majority of retailers are saying, ‘We want to improve this process,'” he said. “For a long time, people in the industry didn’t realize how impactful returns were.”
