The retail return rate for 2022 is expected to remain flat from the prior year, while the online return fell, according to a new projection from the National Retail Federation.
Consumers are expected to return $816 billion worth of retail merchandise purchased in 2022. That means the return rate will be 16.5% for 2022, which is about even with the rate of 16.6% in 2021.
Returns skyrocketed as ecommerce accelerated during the pandemic, vaulting the return rate from 10.6% in 2020 to 16.6% in 2021. The leveling off comes as retail sales have continued to grow steadily upward throughout the last three years. While news of a slowdown in growth will likely be welcomed on the logistics front, returns continue to occupy a unique place in the retail landscape.
“Even with 29 continuous months of retail sales growth, consumers have remained steady with the overall rate of merchandise returned to retailers this year,” said Mark Mathews, NRF’s vice president of research development and industry analysis, in a statement. “While oftentimes returns represent a lost sale for a retail establishment, returns can also provide recourse through positive customer engagement and, potentially, another purchase.”
Online return rates in particular have been watched closely. Ecommerce’s shift to focus all of the elements of the shopping experience on the customer has made generous policies like free returns common, even as they helped to fuel a logistics crisis that further flooded already-clogged supply chains over the last year.
In 2022, the online return rate will be on par with the overall return rate at 16.5%, NRF forecasts. That’s well below the online rate of 20.8% in 2021. As is the case with the overall rate, this comes as ecommerce sales have also continued to grow this year. This is the first time the overall retail and online figures have been even since NRF started measuring returns in 2019.
In all, NRF expects $212 billion worth of merchandise purchased through ecommerce to be returned in 2022. About 10.7% of those returns will be deemed fraudulent.
What's driving return rates higher?
While there is a leveling off in growth of the return rate, the numbers indicate that the pandemic's boost in returns may be sticky. There are a number of practices that foment online returns. Here’s a quick look at several of the common:
Home Try-On: Dating back to the customer-facing innovation of pioneers like Zappos and Warby Parker, home try-on has become a feature of many ecommerce shopping experiences. It’s a perk for customers, but can result in more returns of items that don’t fit. Augmented reality has been deployed a tool for virtual try-on to help cut down on returns.
Bracketing: When a customer buys multiple sizes or colors of an item, then sends back whatever they don’t like.
Try-On Hauls: When people buy numerous different items from fast fashion retailers like Shein, then create content on platforms like TIkTok featuring themselves trying on the items, with the tag “Keep or return.” While similar to home try-on, in this case it is a social trend that is driving the growth of the practice, and not necessarily shopping itself.
Wardrobing: When used and non-defective merchandise is returned after a customer wore it for a specific purpose. This is cited as a fraudulent practice that half of retailers NRF surveyed have experienced.
Price Adjusting: OK, we made the name up. Still, there’s a real behavior at its heart: Customers return an item they bought in one place after seeing a better deal somewhere else. During Cyber Week, Salesforce observed that return rates doubled on Black Friday, likely because customers returned an item they bought earlier in the holiday season after finding a deeper discount on the shopping holiday.
Shoplifting: This is the most obvious example of fraud. NRF found that 41.4% of retailers saw the return of shoplifted or stolen merchandise. Meanwhile, 20% of retailers attributed return fraud to organized crime.
How are retailers responding?
When it comes to returns, retailers face competing forces.
At this point, free returns are expected by customers, and many brands and retailers see them as a necessary element of a shopping experience that doesn’t allow someone to try on an item before buying it. As NRF points out, returns are also a customer-facing function. If done well, it’s another area where people can delight customers, and build loyalty.
However, there are also serious drawbacks that only become more magnified as returns grow. High return rates can deliver a blow to profitability. Plus, the merchandise sent back through reverse logistics systems stresses supply chains, and much of it ends up becoming waste that mars the environment.
How does a retail executive balance those forces? It appears to remain an open question. Just take a look at the policy changes currently being piloted:
There are policies that disincentivize returns, such as Zara, J. Crew and H&M’s moves to test charging for returns.
There are others that are putting forth returns as a perk, like Walmart’s “no concerns” returns test this holiday season that provides free return dropoff, and makes home pickup a feature for Walmart+ members.
There are also continued efforts to make the returns process easier on the delivery process. FedEx recently announced that it will introduce “no box, no label” returns in 2023. Meanwhile, PayPal-owned Happy Returns is seeking to grow in-person return options with its Return Bars, and Amazon is setting up dropoff points at Staples.
Keeping items in circulation provides a second life for goods, and cuts down on returns. It's a big reason why many brands and retailers launched their own resale channels as return rates rose over the last two years.
Whatever the results of these tests, it’s a reminder that it’s a time to think differently about returns. Perhaps blanket policies are no longer the answer.
“Retailers must look for ways to individualize the returns process through data-driven insights,” said Steve Prebble, CEO of Appriss Retail, which worked with NRF on the survey. “This will minimize the risk of accepting fraudulent returns while enhancing the customer experience for loyal shoppers.”
