This Year’s Avalanche Of Online Orders Won’t Be So Great For Retailers When Everyone Starts Returning Gifts

While many retailers were surely over the moon with an increase of online sales this year, that same burst in orders will have one effect that likely won’t make companies happy. Because when it comes time to return gifts purchased online, retailers are often on the hook to cover the costs involved.

It’s always been costly to handle returns, but when customers shop online, there’s invariably going to be a lot more gift returns, especially when it comes to clothing that the recipient hasn’t had a chance to try on. According to a Bloomberg report citing Customer Growth Partners, shoppers are expected to return 30% of clothing and shoes bought online, which is twice the return rate of items purchased in a physical store.

Those costs will add up for the 80% of retailers who offered free shipping on returns over the holidays, with companies shelling out $5 to $7 for shipping, along with the cost of process a return. That can come to about $5 in credit-card fees and labor costs to get an item ready to resell it.

Even if the retailer does manage to sell off that returned item, they’ll likely lose money in the process as many items won’t be in the right season any more. Heck, getting even $0.20 on the dollar for returned goods is a good price, Johnson explained.

In addition to all of that, there’s a lot more fraud these days: 3.5% of holiday returns, or $2.2 billion worth, will be bogus, compared to 3.5% in 2014, says the National Retail Federation.

“Return fraud remains a critical issue for retailers with the impact spanning far and wide, in-store and online,” Bob Moraca, vice president of Loss Prevention for the NRF, said in a statement. “While technology has played a significant role in deterring many in-person fraudulent transactions that would have otherwise gone unseen, there is little that can be done to prevent a determined criminal who will find a loophole one way or another.”

Online Surge Means Many Not-So-Happy Returns for Retailers [Bloomberg]

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.