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Online Order Returns Spike Post Holidays

Private courier UPS has declared January 2nd National Returns Day, the busiest package return day of the year, and prepared to handle nearly 2 million packages representing returned gifts on this day alone. We take a look at online order return rates and volume while discussing the costs, and even benefits, of reverse logistics operations for eCommerce merchants.

The holiday hangover is real. Merchants often deal with increased fraud activity in the holidays that comes back to haunt them in January, along with a spike in returns around the same time. UPS alone expects to handle 1.9 million package returns on just one day: January 2nd. After eCommerce sales increased nearly 19 percent this holiday season, UPS is predicting a 26 percent increase in purchase returns they will ship on January 2.

CBRE Group estimates a return rate of 8 percent for physical retail stores, but anywhere between 15 and 30 percent of online orders are returned, depending on the industry. This implies that approximately 2 to 4 times as many orders are returned in the online channel relative to brick-and-mortar. Similarly, 101data found that from 2015 to 2018 experienced an order return rate four times higher than at brick-and-mortar Gap stores. Apparel is one of the industries that experiences the highest return rates online.

CBRE Group also estimates that returns for online purchases between November 1 and December 31 represent more than $41 billion in volume. Whether the result of misguided gifts, misleading marketing, poor product quality, or “wardrobing” and other buyer scams, returns are expensive. In many cases a merchant will absorb the return shipping cost, like Amazon who offers this on millions of items, and in the EU this is required. Even if a customer can return in-store or pays shipping themselves, there are associated operational, inventory/warehouse and payment processing costs.

Online retailers have taken steps to reduce costs associated with order returns, most notably Amazon who offers lockers for consumers to use for returns as well as in-store returns through their Whole Foods grocery stores and a partnership enabling returns at Kohl’s. Meanwhile, the increased demand on shipping for returns has led other major private courier FedEx to form a partnership with Walgreens allowing consumers to drop-off shipments at any Walgreens nationwide.

While costly returns can also represent potential benefit to the multi-channel retailer who accepts online returns in-store, as well as the retail locations partnering to process returns on another’s behalf. According to a recent National Retail Federation survey (December 2019) reaching nearly 8,000 U.S. adults, 74 percent of consumers returning or exchanging a gift are likely to make a new purchase on their visit. Multi-channel merchants should offer cross-channel returns to maximize this benefit while also keeping customers happy. Another NRF survey found that 80 percent of consumers prefer to make returns in-store.

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