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How e-commerce retailers will handle returns in 2024

Online retailers saw record-breaking return volumes this holiday, with merchandise returns on December 26 jumping by 35% year-over-year. Loop Returns CEO Jonathan Poma joins Yahoo Finance Live to discuss the surge in e-commerce returns.

Poma notes elevated return rates "across the board," but particularly in apparel and home goods. With seasonal holiday shopping periods driving purchases, return rates typically climb even higher post-holidays and online return volumes drastically outweigh in-store returns.

As logistics costs rise alongside e-commerce deliveries, Poma says free return perks may diminish. Poma explains that merchants like Amazon (AMZN) are trying to "dial in their policies" to combat fraudulent returns and expenses and losses associated with returnless refunds.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Click here to watch the full interview on the Yahoo Finance YouTube page or you can watch this full episode of Yahoo Finance Live here.

Video Transcript

[AUDIO LOGO]

JOSH LIPTON: Retailers are rethinking the way they manage returns in the wake of a record holiday shopping season. On December 26, historically, the biggest day for returns, total volume was up more than 35% from the year prior. It's according to data from Loop Returns.

And joining us with more on the evolving returns landscape is Jonathan Poma, Loop Returns CEO. Jonathan, it's good to see you. So that's a number that stands out there, Jonathan. December 26, total volume was up more than 35%. Do we have any line of sight, Jonathan, into what is being returned? Not so much specific brands, but broadly, is it clothing, furniture?

JONATHAN POMA: Yeah, yeah. Pleasure to be here today. Thanks so much for having me. I think across the board, I mean, maybe it's a-- maybe it's a cliche, but I think anything being online is returned. We see in industries like apparel, it's the return rates are as high as 20% or 30%. But even in home goods, in health and beauty, you're seeing five, sometimes double-digit, 10% return rate. So it really just comes down to-- you know, e-commerce is continuing to grow. Return rates in e-commerce are significantly higher than return rates in retail. And then specifically, in holiday season when we're buying gifts for other people, those return rates go up even further.

JULIE HYMAN: And, Jonathan, I'm really curious how returns have changed even, you know, during the era of e-commerce if you will. For example, it used to be, you got something, you could send it back, no problem, no cost. That seems to be changing as well. What are the biggest changes we've seen in the last year or two?

JULIE HYMAN: Yeah, totally. And you're right, things are changing. I think, you know, primarily maybe two things are happening at the same time. Consumer expectations continue to rise. So shoppers want free. They want easy returns. And logistics costs continue to rise. You know, e-commerce logistics, the market is going to grow 6% annually. Over the next decade ultimately becoming a $3.2 trillion market. And transportation and labor costs are really driving those-- driving those costs higher.

So merchants, their panels are under scrutiny. Logistics is an area of focus. And with those increased costs, we are seeing merchants really try to dial in-- dial in their policies. And, you know, retailers like Amazon, for example, they can leverage a massive data set to decide what customers should and shouldn't get a free return, what customer is abusing a policy or is executing a fraudulent return. And these direct-to-consumer retailers with a smaller data set really can't do the same things on their own. So they're introducing fees, introducing return, these refunds, and introducing all sorts of new things to try and reduce return volume overall as a percentage of sales, reduce returns and reverse logistics costs, and really mitigate the impact of returns fraud and abuse.

JOSH LIPTON: And, Jonathan, I had this experience where I had a piece of furniture, Jonathan. I wanted to return it. And the company said, you know what, Josh? No worries, no drama, full return, but keep the furniture. We don't want it back. How much of a trend is that?

JULIE HYMAN: Yeah. It's a significant trend, Josh. We call that returnless refunds. And we've seen that up in our merchant base 55% year-over-year. And then obviously, what we're trying to do on the back of it is help merchants continue to offer that when it's right and to mitigate the ability of, you know, bad actor shoppers from figuring that out and buying a $1,000 sofa and realizing that that merchant is going to let them keep the item and give them a full refund.

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