How Higher Inflation Could Mean More Returns This Holiday Season

Stephen Garner
·3 min read

With inflation hitting a 40-year high and retailers concerned about mounting costs squeezing margins, rising return rates could also put a damper on holiday cheer this year.

According to a new survey by Phelps United, 52% of respondents said they expected to return at least one gift received via an online merchant this holiday season. Among this group, 47% said they expected to return at least three gifts, with nearly 1 in 5 (19%) saying they planned to return at least five gifts and 6% planning to return more than 10 gifts, the e-commerce company found.

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Phelps United also found that with returns so ubiquitous, consumers are more likely to scrutinize the return policies of online merchants they do business with. More than three-fourths (76%) of respondents said they review the return policies of e-commerce stores before sending a gift. Most said they would be more likely to shop at an online retailer in the future if it provided free shipping on returns (82%), a flexible window of 30 days or more for returns (58%), and a hassle-free or no-questions-asked return policy (52%).

“Americans expect to return gifts they receive via online retailers today,” said Phelps United president Adam Shaffer. “It’s become such an intrinsic part of the holiday shopping experience that when retailers decide to tighten their policies, they risk leaving a negative impression—a bad aftertaste that may impact long-term brand perceptions.”

This negative impression was also found in a recent survey by ParcelLab. The logistics company found that 62% of consumers stated that they are unlikely to reengage or shop again with a retailer or brand that had a poor/inconvenient returns process, with 37% saying returns that include shipping fees as part of the returns process might lead them to want to shop less with a retailer or brand.

In a separate survey by PayPal, nearly 50% of consumers say they’ll be returning holiday gifts this year, with 86% of consumers saying they make a point to check a retailer’s return policy before they even make a purchase.

Economic pressures are driving up returns, PayPal reported. Nearly 1 in 4 have been returning a greater percentage of their online purchases as a result of inflation and other economic pressures that are impacting their financial health. This number skews even higher for those under the age of 45.

PayPal also found that in-person returns are the preferred return option, with 54% of consumers prefer in-person drop off at either the retailer’s store or third-party stores. This ranks high above home pickup, even when home pickup is free. Mail-in returns are a thing of the past, PayPal found, with 79% of consumers try to avoid mail-in returns whenever possible, and this number skews higher for those under 30 (83%).

This data follows the National Retail Federation’s yearly returns survey with data science company Appriss Retail, which found for every $1 billion in sales, the average retailer incurs $166 million in returns. The survey, which came out earlier this year, also found that for every $100 in returned merchandise accepted, retailers lose $10.30 to return fraud.

NRF found that the categories with the highest return rates were similar to 2020 metrics: auto parts (19.4%), apparel (12.2%) and home improvement and housewares (tied at 11.5%).

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