Study: Online Holiday Returns Pass $1B Mark

The Boston, Massachusetts-based research firm said that many online retailers are experiencing higher return rates than in prior years, with some e-tailers seeing between 20 and 30 percent of all sales being returned for exchange or refund.

"The amount could easily approach $1.5 billion," said Paul Ritter, the director of online retail strategies at Yankee Group, which has tracked returns by surveying both retailers and third-party providers of return services.

With several estimates putting holiday sales in the $9 billion to $10 billion range, the amount of returned goods could pose a significant burden for merchants, Ritter said.

Buying Sight Unseen

The analyst offered several possible explanations for increased returns, including the fact that some shoppers apparently "hedged their bets" by buying the same product at more than one site. That trend probably reflects bad experiences some shoppers had during the 1999 holiday season, Ritter said, when several major e-tailers experienced well-publicized problems in fulfilling orders in time for Christmas.

Ritter also said that more shoppers are taking the online plunge -- and that means buying more items sight unseen.

"Shoppers are becoming more comfortable buying products online that have traditionally been bought in stores in which consumers can actually see, touch or hear the products they are buying," Ritter said. "Many of these online purchases aren't what they were expected to be."

Return Riddle Puzzles

The problem of returning goods bought online has been cited by several researchers as a major stumbling block in e-tail growth. Jupiter Media Metrix reported recently that 42 percent of online shoppers said they would buy more online if the return process was easier.

That concern among shoppers may help explain the surge that brick-and-click retailers, such as Toys 'R' Us and Kmart, experienced during the past holiday season. In fact, reports have said that most of the fastest-growing Web shopping sites during the fourth quarter of 2000 were brick-and-click companies such as JCPenney and Wal-Mart.com.

However, a recent study from Accenture found that only 60 percent of brick-and-click merchants allow customers to return items bought online in retail stores.

More Options

The good news for pure-play e-tailers, according to the Yankee Group, is that the options for handling returns are expanding. In September, United Parcel Service (NYSE: UPS) announced an e-commerce returns service that lets shoppers print out return labels and have packages picked up at their home.

The issue of returns is only half the problem, however. A report released Thursday by Jupiter Media Metrix found that more than 40 percent of e-tailers lose money on shipping. The report also predicted a boom for third-party shippers as companies look to outsource the labor-intensive task of fulfilling orders.