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The 2021 Holiday returns forecast: What merchants should expect

illustration of a person holding shipping boxes with an arrow pointing back to their origin

[Updated post from December 17, 2020]

Did you know that 73% of shoppers are annoyed when they have to return or exchange a gift? 

Given how stressful and confusing holiday returns can be, it’s not surprising that many consumers approach this part of the post-purchase experience with anxiety.

So, what can merchants and retailers do to make the return process run more smoothly in the New Year? 

To have a successful return season, it’s important to understand the holiday landscape and how this is set to influence return behavior. In this post, you’ll find our 2021 holiday returns forecast – and how brands can prepare to manage returns more effectively in the New Year.

Consumers are ‘hoarding’ gifts this year – and this means more returns

Concerns over supply chain challenges and product shortages have led many consumers to start their holiday shopping earlier than ever before. Mckinsey’s holiday survey found that 40% of consumers started shopping for gifts earlier than last year due to concerns over shortages or delayed shipping.

An earlier start to the holiday season has obvious benefits for retailers, with higher than usual foot traffic assisting retailers in their recovery from the pandemic. 

However, consumers’ fear of missing out on the best holiday gifts is also driving so-called ‘hoarding’ behaviors, with some shoppers snapping up goods with the intention of returning if they find something better. 

This is backed up by forecasts which have found that 42% of people are already planning to return at least some of this year’s holiday gifts – 4% more than 2020 (38%). This rises to 57% and 53% for Gen Z and Millennial consumers respectively.

In sum, the post-holiday return rush is set to be more intense than ever as consumers stay on the lookout for ‘something better’. So, what can retailers do to avoid losing revenue after the holidays?

Incentivize customers not to ask for a refund. While there’s little that brands can do to dissuade customers from returning items, you can influence their decision on whether to pursue a refund. Nearly two-thirds of consumers plan on exchanging or finding a replacement for an item they’ve returned, which gives you a valuable opportunity to retain revenue. Offering free return shipping on exchanges or store credit, for example, encourages customers to maintain a relationship with your brand rather than asking for their money back, 

Returns are playing a larger role in defining the customer experience

Because it occurs post-purchase, returns have traditionally been a neglected part of the customer experience. It’s easy for retailers to view returns as signaling the end of a customer’s relationship with your brand – rather than as an opportunity to demonstrate why they should come back.
But surveys reveal just much weight customers put on the return experience.  According to Oracle, 42% of consumers say that an exchange/return policy that’s difficult to navigate is what defines a poor shopping experience, behind only unhelpful staff (44%):

chart showing what defines a bad shopping experience for customers online or in-store

And we all know that if customers receive a negative shopping experience, they’re very unlikely to come back. When 32% of all customers would stop doing business with a brand they loved after just one bad experience, poor returns management can be the biggest source of customer churn.

So, what separates a great return experience from a poor one?

Make returns convenient for your customers. Small steps like making your returns policy easily accessible on your website and allowing customers to initiate returns via links in order confirmation emails make a huge difference to the ease of the return process.

Good communication. The pandemic has only added to anxiety about the progress of return processing and refunds. Be proactive in letting customers know about the status of their return and how they can reach out to you with questions or concerns.

Asking for feedback. Asking your customers about the quality of their return experience is a great strategy for finding new ways to improve your workflow and increase customer satisfaction.

Don’t expect returns to turn up immediately after New Year

For all the talk about National Returns Week – the first week of the New Year when consumers begin returning unwanted gifts – this doesn’t quite reflect how consumers go about managing items they want to return.

While 40% of consumers say they immediately return purchases that aren’t suitable, 24% admit they are slow to return and currently have items that need returning. A full 15% still have items they’ve never gotten around to returning!

In sum, your customers aren’t going to approach returns in the same way. Due to seasonal travel, shipping delays, and the general busyness of the New Year, many shoppers are likely the make returns later than they normally would. With many consumers also choosing to start holiday shopping earlier than usual, you’ll need to think about how this could affect your return policy.

Consider offering longer return windows. According to Narvar, 39% of retailers offer a ‘standard’ 30-day return period in their policy. However, you may want to consider lengthening this window for purchases made during the holiday season. As well as offering customers more flexibility, this also helps to spread out holiday returns over a longer period to avoid overwhelming your operation

More consumers want to return gifts in-store

Offering BORIS (Buy Online, Return In-Store) is fast becoming the table stakes for omnichannel retailers. 

66% of U.S. consumers say they’re more likely to buy something online when they have the option to return it to a store, while surveys show that in-store returns are just as sought after as BOPIS (Buy Online, Pick Up In-Store) services.

It’s not hard to understand why in-store returns are becoming increasingly popular with consumers. Returning in-store means not having to pay for return shipping or face long waits for refunds, which create some of the biggest areas of friction in online returns.

And it’s not just consumers that benefit from BORIS policies; 53% of consumers would consider buying other items after coming in to make a gift return. By giving shoppers a solid incentive to come into your store after the holidays, you have a valuable opportunity to upsell alternative products and start a new purchasing cycle.

Offer multiple returns methods. With consumers showing an increasing preference for a variety of return options, omnichannel retailers need to avoid siloing their customers into return processes that are unsuitable for their needs. In addition to returning via mail and in-store, alternative drop-off locations such as pharmacies and grocery stores are also seeing a growth in popularity. If you don’t have physical store locations, consider partnering with a return management provider like Happy Returns who can put a return network at your disposal.

Holiday return season is a challenging time of year for both emerging and established retailers. With higher return volumes expected in 2021 due to changing return behaviors, brands need to be ready for an influx of returned items across selling channels over a longer period. By following our tips above, you can endure that your business is well-positioned to handle the holiday returns rush – and ensure that customers walk away happy and satisfied by their experience.

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