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The 2022 post-holiday returns forecast: What merchants should expect

Illustration of a person holding a gift with arrows pointing towards and away from it.

[Updated post from December 14, 2021]

Did you know that 73% of shoppers are annoyed when they have to return or exchange a gift? Given how stressful and confusing returns can be, it’s not surprising that many shoppers are anxious when they approach this part of the post-purchase experience – especially during the holidays.

Yet it’s not as though post-holiday returns are rare. According to the National Retail Federation, 17.8% of holiday merchandise sold during the 2021 holiday season was returned. If your brand doesn’t have a good post-holiday returns strategy, the New Year is going to be stressful and costly for your business.

So, what can merchants and retailers do to make the post-holiday return process run more smoothly? 

In addition to processing returns efficiently, it’s important for merchants to understand the holiday landscape and how this is influencing shopping behaviors. In this post, you’ll find our post-holiday returns forecast for 2022 – and what brands can do to manage returns more effectively in the New Year.

Returns define the customer experience

So, why should retailers care about post-holiday returns, or post-holiday returns management in general?

Because they occur post-purchase, returns have traditionally been a neglected part of the customer journey. It’s easy for retailers to view returns of holiday purchases as signaling the end of that customer’s relationship with your brand – rather than as an opportunity to demonstrate why they should come back.

But surveys reveal just much importance customers place on a high-quality returns process.  According to Oracle, 42% of consumers say that an exchange/return policy that’s difficult to navigate is what defines a poor in-store or online shopping experience, behind only unhelpful staff (44%):

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

The fact is that if customers have a negative shopping experience, they’re very unlikely to return in-store or visit your website again. When 32% of all customers would stop doing business with a brand they loved after just one bad experience, poor post-holiday returns management can be one of the biggest sources of customer churn.

Aside from the customer experience, processing returns efficiently is important to protect your profit margins and fulfillment center workflows during peak season. The cost of reverse logistics – including return shipping fees, offering exchanges, reconditioning, analyzing return data, and more – add up very quickly as holiday orders flow back into the warehouse.

So, what return trends do brands need to pay attention to in 2022 to ensure a smooth returns process after the holiday season?

Trend 1: Consumers are shopping earlier than ever for gifts

Concerns over product availability and ongoing inflation have led many consumers to start their holiday shopping earlier than ever before. Mckinsey’s 2022 holiday survey found that 56% of holiday shoppers started buying gifts in October – 11% higher than DURING the 2021 holiday season.

From a cash flow perspective, this early start to the season is a big advantage for brands. However, it does have a notable impact on your holiday returns policy.

If you don’t adjust return windows to accommodate this earlier start to the holiday shopping season, you could be faced with a lot of angry customers who haven’t had the chance to send the gift before the standard 30-day return window expires. If this is their first holiday season shopping with your brand, they’re unlikely to purchase from you in the future.

By lengthening your return window for holiday purchases, you can offer customers more flexibility and spread-out post-holiday returns over a longer period to avoid overwhelming your operation.

Trend 2: Expect a lot of customer returns to be discounted product

Thanks to rising inflation hitting consumers’ wallets, holiday shoppers are more price-conscious in their gift purchases than ever before. According to project44 Peak survey that polled 1,500 consumers across the U.S., U.K., France, and Germany, 78% of consumers will compromise on gift selection to get a better deal.

In sum, consumers are much more likely to gravitate towards promotions and deals during these holidays. So, what does that mean for returns management in the post-holiday season period?

If you’re selling a lot of discounted merchandise, it’s more likely that returned items are going to affect your profit margins and have a much smaller resale period. So, your returns workflow needs to reflect this by ensuring you have a strategy for how to resell returned inventory quickly. Sales tactics such as flash sales and product bundling are excellent ways to prevent excess inventory from piling up.

Trend 3: Trending product categories have high return rates

Each holiday season brings with it a different roster of trending products that are sought after by shoppers as the perfect gift. However, this can have a big impact on customer returns after the holidays.

Why? Because each product category has its own quirks surrounding the exchange and return process. By knowing what products are proving to be popular as gifts, you can prep your returns management strategy accordingly.

In 2022, inflation has resulted in price hikes across a range of categories, such as electronics and toys, while the price of apparel has dropped by -7.5% YOY, according to Forbes. With apparel sales having grown by 22.5% during the 2021 holiday season, it’s safe to assume that apparel will see a strong performance in 2022. But as a category with very high return rates, brands who are selling apparel during the holidays will need to be prepared for high volumes of returned garments in their warehouses.

Trend 4: Consumers want more flexibility over how they return gifts

When the world was deep in the grip of the COVID-19 pandemic, e-commerce saw a massive leap in growth as consumers switched to shopping online to avoid the crowded brick and mortar store.

Yet as recent surveys indicate that 2022 is going to be different from previous years; only 39% of consumers surveyed by The Conference Board’s Holiday Spending Survey say they intend to purchase at least half of their gifts online this year, down from 52% in 2020.

If holiday shoppers have made gift purchases in-store, it’s safe to assume that they’ll also prefer to exchange items or return at least one gift to the place it was purchased from. Moreover, BORIS (Buy Online, Return In-Store) is becoming increasingly popular with consumers – including those who shop online.

Why? Returning in-store essentially means free returns. Not having to pay for return shipping costs – or face long waits for refunds or store credit -removes some of the biggest areas of friction from the returns process and creates a positive experience with your brand.

In fact, 66% of U.S. consumers say they’re more likely to buy something online when they have the option to return items to a store, while 53% of consumers would consider purchasing additional items after coming in to make a post-holiday 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 lower return rates. Moreover, in-store returns help you combat return fraud and combat repeat offenders much more effectively.

In sum, retailers need to avoid siloing their customers into return policies 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 to reduce shipping costs. If you don’t have physical store locations, consider partnering with a return management provider like Happy Returns which can put a return network at your disposal.

Final takeaways

So, what separates a great post-holiday returns experience from a poor one?

Make returns as convenient as possible for your customers. Small steps like making holiday return policies easily accessible and enabling customers to return online purchases via brick-and-mortar stores or curbside will make a huge difference to the ease of the return process.

Keep a close eye on consumer behavior. Habits during one holiday shopping season are not going to be the same as another, so it’s important to monitor what consumers are buying and when. This will provide good indicators of what kind of return trends you can expect to see so you and your customer service team can plan reverse logistics accordingly.

Think about what happens after you process returns. Your brand is now sitting on a bunch of holiday gift returns. Now what? Make sure that you have a plan for how to shift holiday inventory and avoid excess stock from accumulating. Incentivize consumers to accept exchanges or store credit to prevent revenue from escaping.

The post-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 returns management after the holidays– and ensure that customers walk away happy and satisfied with their returns experience.

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