London Daily

Focus on the big picture.
Wednesday, Feb 05, 2025

A 'returns tsunami' is about to deal a crippling blow to retailers

A 'returns tsunami' is about to deal a crippling blow to retailers

It's the "calm before the storm" as consumers start to ship back unwanted gifts, but it comes as retailers are still dealing with a pile of inventory.

A tidal wave of returns is about to hit retailers already dealing with excess inventory.

Inventory glut was the theme of 2022 for retailers ranging from Nike to Nordstrom to American Eagle. Quarter after quarter, retailers — particularly in the apparel space — reassured Wall Street that they were working through the mountains of extra product they'd accumulated in 2022, the result of cooling consumer demand combined with a hangover from tangled supply chains.

And while heavy holiday discounting may have helped, industry experts say retailers are months away from fully easing their inventory issues — and that it's time to brace for a record number of returns. 


A 'returns tsunami' could hit retailers in the next two weeks

The average consumer starts sending back holiday purchases in the first few weeks of January, which means retailers will start receiving them in another 10 to 14 days, according to Romaine Seguin, a former UPS executive and the CEO of Good360, a nonprofit that partners with retailers to donate returned items that can't be resold. 

"It's the calm before the storm, because right now the storm's with the UPS stores and whoever's taking all the returns," she said. 

A December report from Insider Intelligence predicted that US shoppers would send back more than $279 billion worth of merchandise by the end of 2022, equivalent to 26.5% of consumer purchasing for the year. 

For this holiday season specifically, Rob Garf, vice president and general manager of retail at Salesforce, predicted a "returns tsunami" with more than 1.4 billion, or 13%, of orders getting returned, up 57% from last year. Returns-technology platform Loops Returns found that merchants who use its platform processed 133,000 returns on December 26 and December 27 alone, 33% higher than in 2021. 

"'More returns than ever' is the headline," said David Sobie, vice president of Happy Returns, which helps process and consolidate returns for retailers. 

Why so many? Sobie chalked it up to the "one-in-a-generation shift" from shopping in person to shopping online, which has led to people "bracketing" their purchases, meaning they buy more than one color or size of an item at a time and return what they don't want. A November Happy Returns consumer survey found that a third of shoppers planned to bracket heading into the holidays.


Retailers have been dealing with high inventory since spring 2022

But even before this "tsunami" of returns hits, retailers were already dealing with too much inventory. 

Products flew off the shelves in 2021 as shoppers, flush with stimulus money and craving a return to normalcy, drove over $6.5 billion in retail sales. Consumers were buying so much stuff that retailers placed bigger-than-usual orders for the following year. Combine those goods with all the product retailers ordered in 2021 that got stuck on a boat somewhere and arrived late, and by spring 2022, retailers were overrun with inventory — just in time for inflation to slow down consumer spending. 

By September, retailers were "drowning in inventory," D.A. Davidson retail analyst Michael Baker wrote in a note at the time, with total retail inventories up 22% year-over-year.

So when the holidays rolled around, bargains abounded. Discounts on toys topped 34%, compared to 19% in 2019, while discounts on electronics reached 20% versus 8% pre-pandemic, drawing in shoppers and "helping retailers who were challenged with oversupply issues," Vivek Pandya, lead analyst at Adobe Digital Insights, said in a statement. 

But according to Baker, even with all those discounts, retailers' inventory troubles aren't over quite yet. 

"I think they've made progress, I think we're getting there," Baker told Insider. "But I think, on average, retailers won't be fully through the excess inventory at the end of the fourth quarter. My assumption is by the back half of 2023, we're not gonna be talking about inventory overhang anymore."

Comments

Oh ya 2 year ago
Just the start of the recession or depression that the world is headed into. Read banks are buying there own car lots as they are getting so many repos and are trying to recoup as much money as they can from the repos

Newsletter

Related Articles

0:00
0:00
Close
Zelenskyy Urges for 'Robust Security Assurances' from Russia to Conclude the Conflict in Ukraine
European Union Proposes Reforms to 1951 Refugee Convention
China's humanoid robots poised to transform everyday living and spiritual functions.
Changes in US tariffs on Chinese products could affect consumers more significantly than they do China.
How Innovations in China's Humanoid Robots Ignite Fierce Competition with the US
Germany Experiences 34% Decrease in Asylum Applications During Migration Discussion
Experts Challenge Conviction of UK Nurse Lucy Letby for Baby Killings
AfD Chief Alice Weidel Enhances Global Standing Through Meeting with Viktor Orban
Nigel Farage's Reform UK Party Leads Poll Amid Growing Public Demand for Change
Conor Murphy Steps Down as Northern Ireland Economy Minister to Join Irish Parliament
Over 1 Million Face Penalties After Missing HMRC Self-Assessment Tax Deadline
Scottish Government Denies Plans to Ban Cat Ownership Amid Controversy
Bridget Phillipson Urges Parents to Prioritize School Attendance Amid Rising Absence Rates
Keir Starmer Advocates for Stronger UK-EU Security Partnership in Brussels
Six English Councils Granted Permission to Raise Council Tax Bills Above Cap Amid Financial Struggles
Keir Starmer Faces Growing Backlash Over Potential Approval of Rosebank Oilfield
AI Consciousness Raises Ethical Concerns, Say Experts
Families Urge NHS England to Release Full Report on Nottingham Triple Homicide
NHS Initiates Largest AI Trial for Breast Cancer Detection
UK Tightens Regulations on Online Sales of Weight-Loss Injections
Gambling Ads Shown to Parents on Baby Monitor App, Raising Concerns
Ancient Irish Rainforests at Risk Due to the Growth of Monoculture Plantations
EU Leaders Deliberate on Defense Strategy Amid Rising U.S. Tensions
EU Leaders Convene Important Summit on Defense in Response to Rising Tensions
Trump Directs Establishment of U.S. Sovereign Wealth Fund, Considers TikTok Purchase
Britain Considers U.S. Gas Imports in Response to Possible Trump Tariffs
French Prime Minister Bayrou Confronts Several No-Confidence Votes Regarding the 2025 Budget
Shutdown of USAID Headquarters in Light of U.S. Government Reduction Initiatives
President Trump Launches Establishment of U.S. Sovereign Wealth Fund with Possible TikTok Purchase
Investigation Launched Following Viral Video of Bodybuilder's Airport Prank
Cooling Blankets: A Remedy for Those Who Sleep Hot or Just a Marketing Ploy?
Trump Wins Again as Canada Agrees to Strengthen Border Security
Trump Seeks Rare Minerals from Ukraine in Exchange for U.S. Support
EU Leaders Reach Consensus to Increase Defence Expenditure in Response to Growing Security Threats
UK Business Confidence Declines Amid Economic Uncertainty, Lloyds Survey Shows
Abhishek Sharma's Century Secures India a 4-1 T20 Series Win Over England
UK Prime Minister Keir Starmer will welcome German Chancellor Olaf Scholz for talks at Chequers.
Australian soccer sensation Sam Kerr confronts a racial abuse trial in London.
Lloyds and Barclays Bank Customers Experience Service Outages
Thames Water Seeks Court Approval for £3 Billion Rescue Plan Amid Crisis
UK Manufacturing Activity Contracts for Fourth Consecutive Month in January, PMI Shows
Ex-British Soldier Receives Sentence for Espionage on Behalf of Iran and Fleeing Custody
Emergency Crews Deployed on Santorini as Earthquake Swarm Raises Concerns
Wall Street Journal Criticizes Trump's Trade War with Canada and Mexico
Trump Freezes Tariffs on Mexico After Agreement on Border Security
Nearly 96% of New Cars Registered in Norway in January Were Electric
One Dead, Thousands Evacuated as Floods Hit North Queensland
Bart De Wever Appointed Belgium's New Prime Minister
Apple Abandons AR Glasses Project Amid Struggles with Technology and Market Demand
US Man Receives Photo Instead of Drill After Placing Order on Chinese Website
×