Analysis-U.S. retailers may pay the price for 'extended' holiday return season
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(Reuters) - Major U.S. retailers' longer return policies, launched during the pandemic this year to lure consumers, could leave them facing much higher costs if shoppers bring back a record-setting
Retailers entered the 2021 holiday season facing a supply-chain logjam, with inventories at lows unseen since 1992.
Many began Christmas promotions as early as September, to spread out the impact caused by shipping- and labor-related shortages over more months than the traditional peak shopping days between
Retailers also lured shoppers with "extended" return policies. Apple Inc (AAPL),
But this extended return process, which can include shipping costs, cleaning fees and repackaging, can drive higher costs for retailers and weigh heavily on profit margins.
With global supply-chain snarls not expected to ease until at least 2023, the "returns" problem is not expected to go away soon.
"The returns problem is likely to be a big focus area in the coming two years, since the costs associated with the activity are bound to impact earnings ... significantly," RSR Research analyst
U.S. shoppers are expected to return a record
Of that, between
According to the National Retail Federation, a trade group, consumers returned an estimated 10.6% of goods purchased at U.S. retail in 2020. That percentage is estimated to have risen 13.3% during the holiday season, costing retailers
Optoro, which works with retailers and manufacturers to manage and resell returned merchandise, said it expects shoppers to return
While longer return windows may not directly add to retailers' expenses, it does impact their ability to use working capital for other things, said
Retailers do not usually break out return rates or related expenses, but signs are emerging that the wave of returns started much before Christmas this year as consumers started shopping sooner, leading to higher costs because of the longer grace period, according to some retailers.
Over the past six weeks, privately owned office supplies retailer Staples has seen a 30% increase in drop-offs and returns, said
UK-based online fashion retailer Boohoo said UK return rates its quarter ending
'LIVING IN A RATS' NEST'
Consider a sweater priced at
If a customer returns the sweater to the store and it is not resold, the retailer loses
And with online shopping growing, retailers have boosted orders to account for items not available because they are in transit or sitting unsold in stores, Rosenblum said. But further exacerbating the problem is the risk of all that excess inventory also going unsold.
"We are living in a rats' nest at the moment, and it's really hard to untangle what's going to happen," she said.
Apple (AAPL) CEO
Apple (AAPL) introduced a policy this year allowing customers up to 68 days to return a product, instead of 30 days.
Similarly, Nordstrom Inc's (JWN)
(Reporting by