Report: $90 Billion Worth Of Holiday Purchases Returned

Report: $90 Billion Worth Of Holiday Purchases Returned Promo Image

What happens to the misfit toys of 2017? According to one company, unwanted gifts are likely to end up in the trash.

CNN Money reports that only about half of returned items go back on sale, based on estimates from Optoro, a tech company that handles retail returns. Not all of those items can be listed at full price.

Optoro calculates that $90 billion out of $380 billion worth of annual item returns happen during the holidays. While that's good news for shipping companies, it can be quite costly for retailers.

About half of the items that are not resold go back to their manufacturers; others are sent to discount retailers. Those items are sold at a fraction of their cost and often end up at pawn shops or wholesale warehouses.

Factors such as long return windows for in-store or online purchases, the expectation of covered shipping costs on e-commerce items, and satisfaction-based return policies have pushed the cost of returned items on to retailers. If it's cheaper for a retailer to discard an item than ship and resell it, the item will go to a landfill.

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Online sellers are particularly prone to high-cost returns. Between 15 percent and 30 percent of web purchases are returned, according to an estimate from The National Retail Federation.

"They simply accept it as a price of doing business," said Jonathan Byrnes, a lecturer at MIT's Center for Transportation & Logistics.

Shipping services aimed at retailers can benefit from the holiday return period. CNBC reports that 51 percent of holiday returns happen in January, but an additional 40 percent happen in the last few days of the year after Christmas. UPS processed about 5.8 million packages in the first week of January 2017 alone.

Companies similar to UPS, such as FedEx and Amazon, are upping profits by offering physical drop-off locations in businesses such as supermarkets and dry cleaners. From there, the items can be sent to places where they're most likely to sell.

Returning unwanted gifts in physical locations also creates an incentive for retailers. Kohl's offers Amazon pick-up and drop-off services in its stores, which encourages shoppers to visit and browse.

But Byrnes said that the best way for companies to handle returns is to simply prevent them in the first place by avoiding false or incomplete advertising likely to leave the consumer disappointed with the purchase.

"It's the No. 1 problem for retailers. And it's virtually free to fix," Byrnes said.

Sources: CNN, CNBC / Featured Image: Pixabay / Embedded Images: Staff Sgt. Suellyn F. Nuckolls/U.S. Air Force, Rudolph.A.Furtado/Wikimedia Commons

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