Retailers Prepare for a Wave of Merchandise Returns

People walk at a shopping mall in Santa Anita, Calif., on Dec. 20, 2021. (Frederic J. Brown/AFP via Getty Images)

News Analysis

After a prolonged and record-breaking holiday shopping season, retailers are now preparing to face the fly in the ointment of the recent spending spree: a deluge of returns, which are predicted to put additional strain on supply chains and retail operations.

The particular concern this year arises from the supply chain issues that have afflicted the economy in the wake of the CCP (Chinese Communist Party) virus pandemic. In anticipation of concerns about supply chains and distribution during the holiday season, retailers used new strategies to prolong the Christmas shopping season, allowing for additional time to ensure that products were delivered in time.

These efforts were largely successful: October saw record sales as shoppers began to prepare early for the holidays, while sales growth slowed down in November and December relative to previous years. By spreading out the holiday shopping season thusly, retailers were largely able to avoid the worst damages of the supply chain disruptions.

One of the means by which retailers enticed shoppers to buy early was by extending the grace period to return unwanted purchases, allowing consumers to shop months in advance of the holidays without having to worry about being unable to return goods. Thus, rather than be bound to return items within the industry standard window of thirty days, consumers have been given the option to return after sixty or even ninety days at major retailers such as Macy’s, Saks Fifth Avenue, and Wal-Mart.

However, with Christmas Day having passed along with the great bulk of holiday shopping, retailers now must face the “returns” problem as consumers take advantage of extended return policies.

The challenges of accommodating merchandise returns could put additional strain on the already embattled supply chain system, as retailers are forced to expend capital in the short term for repackaging, cleaning, and shipping costs, detracting from the company’s ability to invest in normal operations.

Last January, the National Retail Federation reported that $428 billion in merchandise had been returned to retailers in 2020, constituting 10.6 percent of total retail purchases.

B-Stock Solution estimates that a record $112 billion to $114 billion in merchandise will be returned in the coming weeks, constituting a 24 to 27 percent increase from 2019. There is still a great deal of uncertainty concerning how onerous the returns will prove to retailers, as the industry now enters the uncharted waters of extended return policies in an economy challenged by supply chain shortages.