Here Come The Holiday Returns

Over the past few weeks, U.S. retailers have been boasting about how successful their holiday shopping season has been. Many investors look to stores' success over the holiday period as a good indicator as to whether or not the firm's final quarter will be a profitable one, but now that the holiday hype has died down, many companies must worry about another issue— returns.

Returns On The Rise

Holiday returns are something to be expected, as sizing mistakes and unwanted gifts are brought back in the days following Christmas. However, many firms say returns put enormous strain on their business, often costing them a sizable portion of their revenue.

In 2014, Americans returned $284 billion worth of merchandise, and that figure is expected to rise this year, with around 20 percent of that number being returned following the holiday season.

Online Retailers Struggle

It's difficult to pin down the exact cost of returns to retailers as the majority don't report that information. However, electronics retailer Best Buy BBY said that returned, damaged or replaced goods cost roughly $400 million per year. That figure is likely much higher for online retailers like Amazon.com, Inc. AMZN as customers don't have the ability to try on or see the products before they arrive.

Fraudulent Returns

However, while brick and mortar stores may have a leg up when it comes to mistaken purchases, they also have to deal with fraudulent returns.

The National Retail Federation estimated that fraudulent returns in the US will increase to $2.2 billion dollars, up from $1.9 billion in 2014. More than 90 percent of those fraudulent transactions occur when someone returns a stolen item. This is especially prevalent during the holiday season as many consumers don't have a receipt for items they received as a gift.

Posted In: NewsRetail SalesTop Stories
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...