Post Holiday Gift Returns Could Deal Another Blow to Retailers (1/6)
Jan 6, 2009 11:53 AM
NRF did not return calls seeking comment. NRF’s Return Fraud Survey, released Nov. 13, found 52 percent of retailers planned to make it easier to return items this holiday season compared to their year-round policies. In 2007, only 35 percent of retailers NRF surveyed indicated they planned to do so.
The NRF 2008 Holiday Return Survey, conducted by BIGresearch, a Worthington, Ohio-based research firm, reported that 59.6 percent of shoppers said they now include a receipt with their gifts. Last year, the number was 57.5 percent. And gift recipients are more likely to return merchandise this year because they want to hoard as much cash as possible, says Beemer.
America’s Research Group estimates more than 29 percent of consumers will make merchandise returns this year, compared to the five-year average of approximately 20 percent. Apparel retailers will likely experience the greatest increase, since apparel accounts for a disproportionately large share of holiday gifts and is viewed as a non-necessity, says Craig Johnson, president of Customer Growth Partners LLC, a New Canaan, Conn.-based consulting firm. Clothing made up 12.7 percent of all planned gift purchases this year, according to an ICSC/Goldman Sachs Holiday Survey released in November. Gift cards came in second, at 12.5 percent, but people tend not to return gift cards because recipients can buy products they want or need, notes Johnson .
The anticipated rise in returns comes in the wake of an already weak holiday sales season. In November, the most recent month for which data is available, same-store sales in the U.S. retail sector fell 2.7 percent from the same month in 2007, according to ICSC. Total sales during November declined 0.7 percent, according to ShopperTrak, a Chicago-based research firm. Meanwhile, for the week ending Dec. 27 same-store sales fell 1.8 percent year-over-year, though total sales rose 21.2 percent. (For a complete weekly breakout of holiday sales, please see our Chart of the Week
For the entire 2008 holiday shopping season, Beemer predicts a same-store sales decline of 2.8 percent. Total sales, according to Johnson, will likely rise from 0.5 percent to 1.0 percent.
An uptick in returns will further shrink retailers’ profit margins for the fourth quarter of 2008, says Beemer. But, he adds, the impact might be minimal compared to the damage left by the 75 and 80 percent markdowns many chains have been forced to offer to move their remaining inventory.
“The returns will drag things down a little bit, but the major driver of the dismal holiday sales period will be the overall economy,” says Johnson. “Sales [numbers] may not be quite as disastrous, but profits are still going to be very difficult for many retailers.”
--Elaine Misonzhnik
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