United Parcel Service Inc (UPS.N) on Thursday expects to ship 1.9 million gifts and other items back to U.S. retailers as e-commerce fuels an anticipated 26% year-over-year volume surge on “National Returns Day.”
Jan. 2 is the busiest day for holiday returns in the United States. U.S. shoppers return more packages than their peers around the globe, spurred by free shipping on orders and returns – costly perks that squeeze retailer profits.
About 10% of goods sold in the United States go back to retailers every year, resulting in roughly $369 billion in lost sales, according to a 2018 report from Appriss Retail and National Retail Federation.
Apparel is an outsized contributor. Returns in some categories approach 50% due to inconsistent sizing across brands, said Greg Buzek, founder and president of IHL Group, a research and advisory firm.
“That causes great expense for retailers,” said Buzek, who estimated that annual global losses from retail returns are nearly $1 trillion – up from $600 billion in 2015.
A new crop of startups aims to take the bite out of returns.
Los Angeles-based Happy Returns promises to slash returns-related expenses up to 30% by reducing shipping costs and customer support calls.
It has 700 “return bars” in U.S. retail stores and shopping malls, where customers drop off items and arrange refunds or exchanges. The company charges retailers a flat fee for every item it processes.
“You have to have some free (return) option. Nobody said it had to be the mail,” said Happy Returns Chief Executive David Sobie.
Amazon.com Inc (AMZN.O) also encourages shoppers to return products to its own physical stores or Kohl’s (KSS.N) locations, where eligible items are packed and shipped for free.
While 30% of shoppers return items to stores, more than twice that many opt for shipping, according to UPS’ 2019 Pulse of the Online Shopper report. UPS said it handled more than 1 million returns each day in December, but declined to give an annual total.
UPS and home furnishing retailer IKEA are among the investors in Optoro Inc, which helps retailers sort, resell and dispose of returned merchandise more efficiently.