From staff/wire reports WASHINGTON – Returns and “shrink” continue to pose significant costs for the retail industry.
Total returns in 2024 were projected to reach $890 billion in 2024. Of the $5.13 trillion in in-store and online sales logged in 2023, returns amounted to $743 billion, according to reports compiled by the National Retail Federation and Happy Returns, a UPS company.
Retailers estimated that 16.9% of their annual sales in 2024 would be returned. In comparison, as a percentage of sales the total return rate for 2023 was 14.5%.
According to the NRF, for every $1 billion in sales the average retailer incurs $145 million in merchandise returns. Online sales incur a higher return rate, with 17.6% or $247 billion of merchandise purchased online returned. That compares to 10.02% for pure brick-andmortar returns (excluding online orders that are returned in-store), or $371 billion.
Retailers have been focused on efforts to mitigate returns.
“Returns play an important role within the retail ecosystem and offer an additional touchpoint for retailers to provide a positive interaction with their customers,” said NRF Vice President of Industry and Consumer Insights Katherine Cullen. “Retailers recognize the value of returns and their integration with brand loyalty, and many are prioritizing their returns capacity to ensure a seamless customer experience.”
Return policies and expectations impact the consumer throughout their shopping experience. Fully three-fourths of all consumers consider free returns a key factor in deciding where to shop, and 67% say a negative return experience would discourage them from shopping with a retailer again.
Shoppers also value flexibility during the returns process and acknowledge the impact it can have at the initial point of purchase. Eighty-four percent of consumers report being more likely to shop with a retailer that offers ‘no box/no label’ returns and immediate refunds.
In response to consumer demand, retailers continue to enhance the return experience for customers. More than two-thirds of retailers surveyed (68%) say they are prioritizing upgrading their returns capabilities within the next six months. In addition, improving the returns experience and reducing the return rate are viewed as two of the most important elements for businesses in achieving their 2025 goals.
However, retailers must balance meeting consumer demand for seamless returns against rising costs. Fraudulent and abusive returns practices create both logistical and financial challenges for retailers. A majority (93%) of retailers said retail fraud and other exploitive behavior is a significant issue for their business.
According to the NRF, “Consumers are becoming more comfortable with new types of fraud and abuse, such as bracketing and wardrobing.” Bracketing is when consumers buy multiples of the same or similar items, have them shipped, keep one and return the rest. Wardrobing is when a shopper buys an expensive item, wears it and then returns it.
Bracketing has grown among younger consumers, with 51% of Gen Z consumers indicating they engage in this practice.
Dollars lost to returns abuse and fraud in 2023 totaled $101 billion, the NRF calculated.
Even though returns occur throughout the year, they are more prevalent during the holiday season.
A separate NRF study found that for the 2024 winter holidays, retailers expected their return rate to be 17% higher, on average, than their annual return rate. However, retailers have been taking preventive measures to address the higher volume by seeking additional support from third-party logistics providers (40%) and hiring additional seasonal staff to specifically handle returns (34%).
Meanwhile, “shrink” continues to account for billions of dollars in retail industry losses, according to the National Retail Federation.
‘Shrink’ from theft cost $112B in losses As incidents of retail crime continue to escalate throughout the country, retailers have seen a dramatic jump in financial losses associated with theft. When taken as a percentage of total retail sales in 2022, shrink accounted for $112.1 billion in losses, or 1.6% of sales, up from $93.9 billion in 2021, a 1.4% shrink rate, according to the 2023 National Retail Security Survey released by the NRF.
“Retailers are seeing unprecedented levels of theft coupled with rampant crime in their stores, and the situation is becoming more dire,” said David Johnston, NRF vice president for asset protection and retail operations. “Far beyond the financial impact of these crimes, the violence and concerns over safety continue to be the priority for all retailers, regardless of size or category.”
Shrink percentages can vary significantly by retail sector. On par with previous years, internal and external theft accounted for nearly two-thirds (65%) of retailers’ shrink.
Retailers reported that organized retail crime (ORC) remains a significant concern due to heightened levels of violence. More than two-thirds (67%) of respondents said they were seeing even more violence and aggression from ORC perpetrators compared with a year ago.
Even though retailers continue to enhance their loss prevention and asset protection measures, sometimes more drastic action must be taken. Retailers reported being forced to close a specific store location (28%), reduce operating hours (45%), reduce or alter in-store product selection (30%), or place more items behind locked cabinets, as a direct result of retail crime.
As violence has increased, more retailers have opted to enforce a “hands off” approach in the apprehension of shoplifters. More survey respondents said that no employees are authorized to stop or apprehend shoplifters (41%), compared with 38% last year.
The types of products shoplifters are targeting may not be based solely on price point. Products can range from high-price, high-fashion items to everyday products that have a fast resale capability. While organized retail crime groups have traditionally targeted specific items or types of goods, that list has expanded to new categories such as outerwear, batteries, energy drinks, designer footwear and kitchen accessories, and toiletries such as toothpaste and shaving cream.
As retail crime continues to evolve in scope and sophistication, so are retailers’ prevention efforts.
When asked about resource allocation to address today’s risks, 34% have increased internal payroll to support their risks, while 46% have increased the use of third-party security personnel. More than half (53%) have increased their technology and software solution budgets in the past year. With violence being one of the most concerning risks, 54% have increased or are increasing employee workplace violence training.
Policy reform is another critical component of the retail industry’s efforts to combat retail crime. These include initiatives such as raising the felony theft threshold – the amount that must be stolen in order to be considered a felony – or removing or eliminating cash bail.
In California, for example, Proposition 36 took effect on Dec. 18. Previously existing laws that have worked regarding theft and drug cases will be rewritten, taking a harder approach toward recurring offenders and crimes committed with groups.
As an illustration, repeat offenders who until now have been charged with misdemeanors regardless of how many times they’ve stolen property valued at $950 or less, will now be charged with a felony. The new statute also provides for enhanced penalties for gang crimes and stiffer sentences for some drug crimes.
Nearly all NRF members support federal ORC legislation.