Business & Economy

Shippers and online retailers brace for National Return Day

TRACY, CA - JANUARY 20:  Boxes move along a conveyor belt at an Amazon fulfillment center on January 20, 2015 in Tracy, California.
TRACY, CA - JANUARY 20: Boxes move along a conveyor belt at an Amazon fulfillment center on January 20, 2015 in Tracy, California.
Justin Sullivan/Getty Images

For retailers, returns are a necessarily evil that comes at the end of each holiday shopping season, but it appears even more holiday purchases are being returned this time around.

That's because American consumers did more of their holiday shopping online in 2016, and online purchases are returned in greater numbers, compared to traditional in-store purchases.

Amazon recently reported that 2016 was a record-breaking year for online holiday shopping; the company shipped more than a billion items worldwide during the holiday season. eMarketer projected online stores rang in a record $94 billion in sales this holiday season, up 17 percent from last year.

The company - and its competitors - are now facing a wave of returns, as customers re-box their items and ship them back. A new report from the commercial real estate firm CBRE found that about 8 percent of items purchased in brick-and-mortar stores are typically returned or exchanged, but online purchases are returned twice or three times more often.

Jan. 5 is the busiest day for returns, so much so that it has become known as National Returns Day.  UPS estimates it will handle 1.3 million return packages on Thursday, up from 1 million last year. 

Increasingly, outlets like Amazon have dedicated facilities just for returns, so if you send something back it doesn’t go to one of Amazon's huge warehouses in the Inland Empire.

“Those items would go to a facility we have in Southern Nevada,” said Amazon spokeswoman Ashley Robinson. 

January is a prime month for Amazon holiday returns, because customers have until Jan. 31 to return most items purchased from the online retailer during the holidays, according to Robinson. 

CBRE calculates that the total value of returned goods bought online this holiday season (through Amazon and other online retailers) and could be as high as $29 billion.

"It’s a big hit to the bottom line," said Kurt Strasmann, a senior managing director at CBRE. “As total e-commerce sales increase, returns are becoming a bigger and bigger hit to retailers."

Strasmann expects return-policies to become less customer friendly in the future, but he said, for the time being companies are desperate for market share so they are willing to take the hit even as some customers buy multiple versions of products they know they are not going to keep, like shoes in several sizes.

The trick for retailers is to get goods back on store shelves as quickly as possible to resell them at full price. But items – especially clothes and shoes – can quickly go out of style, so returned items are often resold to discount stores like Ross or even destroyed at landfills, costing retailers 4.4 percent of total revenue each year.