‘Tsunami’ of holiday returns expected this year: Salesforce

Retailers are bracing for a surge in holiday returns after a record-breaking Cyber 5, starting on Thanksgiving and ending on Cyber Monday. Software provider Salesforce has forecast a “tsunami of returns” for the second year in a row as consumers have become more picky about what to leave behind from holiday shopping. The firm’s forecasts are based on an analysis of the activity of 1.5 billion consumers in 64 countries, www.digitalcommerce360.com reports.

Salesforce says the rate of online purchases that were returned doubled the week following Cyber 5 and has remained high ever since. The company predicts more than $131 billion in holiday purchases will be returned.

That figure encompasses returns of purchases made globally in November and December 2023. It is based on returns patterns in dollars and percentages from the 2022 holidays and the rest of 2023, Salesforce says.

Return rates will likely rise as high as 20% for a few weeks after the holidays into 2024 as people return gifts, says Rob Garf, vice president and general manager of retail and consumer goods at Salesforce. In 2022, global returns grew to 13% of total orders in the holiday period, an increase of 63% year over year.

Retailers largely corrected more generous return policies after the large increase last year to preserve profit margins, says Garf, adding that experts see retailers oversteering and negatively impacting customer service and experience. The returns experience must be easy, clear, and reasonable, or retailers risk brand loyalty and repeat purchases. He points out that a positive return process can be the first step in a new shopping process for a consumer. Meanwhile, a poor experience can make it the last time a consumer interacts with the retailer.

Returns can be a costly problem for retailers. Companies pay an average of $26.50 to process $100 in returned merchandise, The Wall Street Journal reported in May. In 2022, about 16.5% of retail purchases were returned, totaling about $816 billion, according to the National Retail Federation.

Rates are even higher for apparel, averaging 24.4% between April 2022 and March 2023, according to Coresight Research. That translates to about $38 billion in returned apparel in 2023, or the equivalent of all U.S. Cyber 5 spending this year.

The cost of processing a return of a specific item varies based on several factors, according to reverse logistics firm Optoro. For example, some apparel pieces may be out of style or out of season by the time the return is processed and cannot be sold for full price.