Managing Holiday Returns with Smart Lockers

Although retailers typically accept returns as a cost of doing business, more and more are struggling to manage the onslaught of returns caused by online shopping. This blog explores ways retailers can reduce returns and lower operational costs, as well as how smart lockers can help improve the customer experience.

Predictions for Holiday Returns in Early 2025

Returns are skyrocketing and are expected to hit 17% of all merchandise sales, creating a $890 billion problem for retailers.¹ The return rate jumps to 17% higher than usual during the holiday season. The conundrum is multiplied by the enticement of free shipping, fueling an expected 9% bump in online sales.²

It should come as no surprise, then, that retailers are adjusting their shipping policies to cover costs. A recent Digital 360 survey reports that a mere 22% of retailers would offer free next-day delivery during the holiday season, and none of the retailers would offer free same-day delivery.³ Jason Brenner, Senior Vice President of Digital Portfolio at FedEx, explains: “Cost-saving on delivery is a priority for many, but there is still strong demand for faster delivery when urgency is a factor.”⁴

Apparel leads the pack for the number one category of product returns at an estimated 46.5%.⁵ Footwear trots in second with one expert estimating that two to three pairs of shoes are returned for every pair kept.⁶

The Environmental Impact of Returns

Bracketing, the practice of buying multiple sizes or colors of the same item with the intent of returning some items, also contributes to the environmental and labor costs of returns. Happy Returns estimates that 66% of shoppers employ this tactic.⁷ Even worse, 69% of consumers admit to “wardrobing,” defined as buying an item for a specific purpose, such as a party, and returning it.

Returns pose significant environmental challenges beyond their financial impact. Spencer Kieboom, founder and CEO of Pollen Returns, notes that many returned items never return to store shelves.⁸ Repackaging, restocking, and reselling these items—mainly when shipped internationally—generates substantial carbon emissions. The environmental toll is even more severe when returns end up in landfills. According to Optoro, returns generated 8.4 billion pounds of landfill waste in 2023, while EPA data shows only 54% of packaging materials were recycled in 2018.⁹

How Retailers are Battling Returns

To combat the high rate of returns, some retailers are adjusting their return policies. The Digital Commerce 360 study revealed that under 50% of retailers plan to offer free returns, but 67% of them will extend return deadlines.¹⁰ Some retailers are taking a harsher approach by banning customers who frequently abuse their return policy. Target recently updated its policy to say it “reserves the right to deny returns, refunds, and exchanges including but not limited to prevent fraud, suspected fraud, or abuse.”¹¹ REI, too, has banned customers for making too many returns; according to one local news source, the bans represented “less than 0.02% of 24,000,000-plus [members].”

Meanwhile, other retailers are implementing upfront fees for online returns as a cost-control strategy. Major fashion brands, including Zara, American Eagle, H&M, and TJ Maxx, have adopted this approach. However, the practice remains controversial within the retail industry. While these fees help offset processing costs, critics argue they may damage customer loyalty at a time when retaining shoppers is more crucial than ever. Reverse logistics costs are often so high that behemoth retailers such as Amazon and Target allow customers to keep items with a retail value under $75.00.

Recommerce as a Sustainability Solution

Major brands like Lululemon, Eileen Fisher, Nike, REI, Patagonia, and John Fluevog (the Fluemarket) are entering the recommerce marketplace to cut down the impact of returned or gently used goods as well as for compelling strategic advantages. This move helps attract new customers, with 50% of secondhand shoppers trying unfamiliar brands through resale.¹² These platforms also offer an efficient way to manage excess inventory while maintaining brand image, avoiding the need for dramatic markdowns or liquidation.

The environmental impact is equally significant – each percentage point increase in circular economy activities could reduce fashion industry emissions by 13 million tons of CO2 equivalent by 2030.¹³ Additionally, by establishing their own resale channels, retailers can capture revenue that would otherwise go to external platforms like Poshmark, DePop, or TheRealReal.

Retail Lockers: A Smarter Solution for Managing Returns

While there are many strategies retailers are taking to help manage returns, there is another option worth considering: smart lockers. Smart lockers offer a promising solution by providing more efficient and convenient returns that benefit retailers and customers, as 56% of shoppers prefer in-store returns.¹⁴

• More Efficient — Lockers allow stores to redeploy associates to higher-value work, which can improve satisfaction and customer service. A seamless process also has another significant benefit: Customers are less likely to procrastinate, which boosts brands since it allows them to resell the returned merchandise and capture that revenue faster.
• More Brand Loyalty — According to our recent Retail Customer Experience Survey Global Report, 62% of consumers say they would buy more from a brand if they had a positive experience with returns.¹⁵
• More Convenience – According to a survey by Inmar Intelligence, 56% of shoppers preferred to return their items in-store.¹⁶ Further, this process can be as quick as 7 seconds to return an order, and returning to the store is the lowest hit on retailers’ margins.

Returning Items Using Lockers in 4 Easy Steps:

1. The customer initiates the return online with the retailer or via the retailer’s mobile app
2. The retailer generates a return barcode for the order
3. The customer goes to a locker system at a nearby store, scans the barcode, and places the item into the locker
4. A retail employee collects the order from the locker for processing

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As retailers face a projected $890 billion in returns for 2025, companies are implementing various strategies to manage this growing challenge. Smart locker technology, combined with sustainability initiatives and strategic policy adjustments, represents a comprehensive approach to addressing the financial impact of retail returns.

Ready to embrace hassle-free returns? Speak with a Parcel Pending representative today to discover how our solutions can work for you.

Sources:

1. Dickler, Jessica. Returns are an $890 billion problem for retailers. www.nbcnews.com. December 8, 2024. https://www.nbcnews.com/news/us-news/retail-returns-890-billion-problem-rcna183359
2. Kohan, Shelley E. 2024 Short Holiday Season, Online Shopping Create Record Package Surge. www.forbes.com. December 11, 2024. https://www.forbes.com/sites/shelleykohan/2024/12/11/2024-short-holiday-season-online-shopping-create-record-package-surge/
3. Haleem, Abbas. How online retailers are preparing for the 2024 holiday shopping season. www.digitalcommerce360.com. August 26, 2024. https://www.digitalcommerce360.com/2024/08/26/2024-holiday-shopping-season-survey/
4. Kohan, Shelley E. 2024 Short Holiday Season, Online Shopping Create Record Package Surge. www.forbes.com. December 11, 2024. https://www.forbes.com/sites/shelleykohan/2024/12/11/2024-short-holiday-season-online-shopping-create-record-package-surge/
5. Moore, Kaarin. Don’t make it free, don’t make it easy: How retailers can support sustainable returns. www.retaildive.com. April 19, 2021. https://www.retaildive.com/news/dont-make-it-free-dont-make-it-easy-how-retailers-can-make-returns-more/598337/
6. Unglesbee, Ben. The omnichannel age is here – and it’s expensive. www.retaildive.com. April 5, 2021. https://www.retaildive.com/news/the-omnichannel-age-is-here-and-its-expensive/597653/
7. Dickler, Jessica. Returns are an $890 billion problem for retailers. www.nbcnews.com. December 8, 2024. https://www.nbcnews.com/news/us-news/retail-returns-890-billion-problem-rcna183359
8. Ibid.
9. Optoro. With Returns Fraud & Abuse on the Rise, and 69% of Shoppers Admitting to Wardrobing, with 64% Doing So At Least Once a Month. www.optoro.com. November 19, 2024. https://www.optoro.com/returns-news/optoro-launches-returns-unwrapped/
10. Haleem, Abbas. How online retailers are preparing for the 2024 holiday shopping season. www.digitalcommerce360.com. August 26, 2024. https://www.digitalcommerce360.com/2024/08/26/2024-holiday-shopping-season-survey/
11. Vuocolo, Alex. Retail operations: Retailers battle returns. www.retailbrew.com. November 21, 2024. https://www.retailbrew.com/stories/2024/11/21/retail-operations-retailers-battle-returns
12. Willersdorf, S., Krueger, F., Estripeau, R., et al. The Consumers Behind Fashion’s Growing Secondhand Market. www.bcg.com. October 20, 2020. https://www.bcg.com/publications/2020/consumer-segments-behind-growing-secondhand-fashion-market
13. Berg, A., Magnus, K-H., Granskog, A., et al. Fashion on climate. www.mckinsey.com. August 26, 2020. https://www.mckinsey.com/industries/retail/our-insights/fashion-on-climate
14. Inmar Intelligence. Boost Shopper Loyalty Through Better Returns. www.inmar.com. February 24, 2023. https://www.inmar.com/blog/insights/returns/smarter-returns-build-better-shopper-loyalty
15. Parcel Pending by Quadient. From Chaos to Convenience: How Lockers Are Changing the Return Game. www.parcelpending.com. October 5, 2023. https://www.parcelpending.com/en-us/resources/retail-dive-returns-playbook/
16. Inmar Intelligence. Boost Shopper Loyalty Through Better Returns. www.inmar.com. February 24, 2023. https://www.inmar.com/blog/insights/returns/smarter-returns-build-better-shopper-loyalty