Free Returns: Shopper Favorite, Retailer Challenge.

Key Insights

According to the National Retail Federation, retailers are increasing their workforce to manage returns, which are anticipated to be approximately 20% higher than usual during the holiday season.

Shoppers prioritize free and convenient return policies when purchasing online and may choose to bypass retailers that do not provide such options.

While merchants aim to draw in customers, a growing number have begun implementing fees for certain types of returns in response to the escalating costs associated with processing these returns.

Concerns regarding the potential return of gifts received this year are not unique to you; many share this apprehension.

Retailers are preparing for a significant increase in returns this holiday season, which underscores the conflict between consumer expectations for hassle-free and complimentary return processes and the companies' worries about the financial implications of providing such convenience.

According to recent surveys conducted by the National Retail Federation, online shoppers are expected to be more vigilant about return policies during the holiday period. This situation intensifies the competition for businesses aiming to secure a portion of the approximately $980 billion that the trade group anticipates Americans will spend this winter.

Approximately 75% of consumers consider free returns to be a crucial factor when shopping online. Nearly half have opted against purchasing an item that lacked a straightforward return option, as indicated by surveys conducted by the NRF in collaboration with Happy Returns, a UPS subsidiary specializing in returns. This trend is even more pronounced among younger consumers, as reported by supply chain technology firm Blue Yonder in September.

In response to the anticipated return rates, which are expected to be nearly 20% higher than usual during the holiday season, retailers are increasing their workforce. The NRF's survey revealed that about one-third of retailers are hiring additional staff to manage returns across warehouses, retail locations, and corporate offices.

Approximately 20% of sales in 2024 are anticipated to be returned

Holiday spending has demonstrated robust performance thus far, primarily driven by a significant increase in online sales. However, the inflationary pressures experienced in recent years continue to impact American consumers, leading analysts to project a modest growth in consumer spending of approximately 3% compared to the previous holiday season.

Even after the holiday period concludes, the challenge of processing returns persists, as the volume of returned items has surged in recent years, according to the retail trade association. On average, companies anticipate that 17% of their sales in 2024 will be returned by year-end, a figure that more than doubles the approximately 8% return rate recorded in 2019, as reported by the National Retail Federation.

The strain on logistics and warehouse operations has compelled three-fifths of retailers to choose between allocating resources for fulfilling new orders or managing returns, as indicated by the survey. In response to the escalating costs associated with shipping and processing returns, an increasing number of retailers are imposing charges on customers for specific types of returns.

This situation places retailers in a challenging position: while many aim to improve the return experience for customers, they also seek to limit the frequency of returns, as highlighted by the NRF.

“Improving the returns experience and reducing the return rate are viewed as two of the most important elements for businesses in achieving their 2025 goals — ranking above increasing online sales,” the trade group said.

The rise of free returns has become a key selling point for retailers, especially during the busy holiday season, but it also brings significant challenges. While consumers demand hassle-free return policies, the growing costs and logistical burdens for retailers are hard to ignore. The increasing return rates, expected to reach 20% higher than usual this season, are forcing businesses to hire more staff and consider imposing fees on certain returns.

Striking a balance between customer satisfaction and managing return costs will be crucial for retailers in the coming years, especially as the return trend continues to escalate.

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