By Nathalie Voit
Retail returns in 2021 hit an average of 16.6%, up from 10.6% one year ago, the National Retail Federation (NRF) and Appriss Retail said in a survey released Jan. 25.
Out of the $4.583 trillion sales in the U.S. retail industry, retailers expect to lose about $761 billion in sales from returns, a revenue larger than the federal government spent on national defense in 2020, the NRF said.
The figure is equivalent to roughly $166 million in merchandise returns for every $1 billion consumers spend.
The higher rate of returns in 2021 compared to 2020 is being driven by the growth of online sales, the report said.
The rise of eCommerce during the COVID-19 pandemic prompted by continuous lockdowns and ongoing public health concerns has led to a seismic shift in consumer shopping preferences. Many people are now more likely to shop for goods online than before the pandemic, and those habits appear to be sticking over the long run.
The survey found that approximately 23% of the total sales in the U.S. retail industry in 2021 were online sales. However, online orders have a higher rate of return than in-store ones, primarily because customers can’t try on merchandise or see items in person. According to the NRF, over one in five online orders in 2021 will end up being returned, an increase from 2020.
The rise of consumer returns in the retail industry is also driving an increase in the number of fraudulent returns, the report said.
Fraudulent returns in 2021 totaled $78.4 billion, or roughly 10.3% of the overall rate of returns. The figure is equivalent to retailers losing $10.30 to return fraud for every $100 in returned merchandise accepted, up from $8.80 in 2019, the NRF said.
Meanwhile, holiday returns are expected to surpass the average rate of return in 2021, according to the survey. Of the $887 billion in U.S. holiday sales in November and December, retailers expect 17.8% or $158 billion of merchandise sold to be returned.
Approximately 10.8% of total holiday returns, or $17 billion in sales, will be lost to return fraud, the survey said. The categories with the highest return rates were auto parts (19.4%), apparel (12.2%), housewares (11.5%), home improvement (11.5%), and department stores (11.4%).
People were more likely to return items by credit card than by any other payment type, the NRF said.