Fashion’s returns problem is only getting worse. This holiday season, shoppers have already sent back $112 billion in merchandise globally, up 28 per cent on the year prior, per Salesforce. In the post-holiday returns period (from 26 December 2024 to 10 January 2025), people returned more than 850,000 items, amounting to $113.96 million across apparel, cosmetics and personal care categories, according to returns management software Loop.
The increase is, in part, down to haul culture driving consumers to stock up for social media content (with the intention of returning at least some of the clothes) and the rise of ‘bracketing’ (ordering multiple sizes to find the right fit). But come holiday season, returns spike as consumers opt to send back unwanted gifts, or products they’d bought before the holiday sales kicked off. Salesforce expects the returns merch value to reach $133 billion worth in the next two weeks, given the lag time between logging or accounting for returns
For brands and retailers, returns are a year-round problem. They’re costly, bad for the environment and a logistical pain. The ongoing luxury slowdown means returns are even more of an issue — when brands are already strained, they need to protect their margins and bottom line, with costly and logistically complicated returns making it hard to do so.
In addition to the tough economic environment brands are operating in, returns are a bigger concern this holiday season because retailers are facing higher supply chain costs than normal, says Caila Schwartz, director of consumer insights and strategy at Salesforce. This leaves retailers with lower profit margins. Sea freight costs remain well above pre-pandemic levels, for instance.
Consumers also remain cautious after a year of feeling squeezed, experts agree. This doesn’t just mean they’re buying less, but they’re more likely to second guess the items they do purchase. “In periods of high price consciousness like these, our data shows that consumers are more likely to reassess their purchases, which leads to higher returns rates,” Schwartz explains.
Schwartz expects higher returns to continue for the few weeks ahead given holiday returns often stretch into late January. Post-January, there’s usually a leveling off of returns, she says, noting that Salesforce expects the same pattern this year.
What’s the solve?
Returns may be set to level out, but even when lower than the holiday spike, they remain a thorn for retailers.
The debates surrounding returns fees (should retailers implement them or not?), virtual try-on (does it work?) and educating consumers (can sustainability facts be a deterrent to the masses?) churn on. But experts are looking to a new host of potential solutions from artificial intelligence to resale to help curb returns — and satisfy consumers when they’re not available.
Seventy-five per cent of US shoppers are interested in using AI agents to complete returns and exchanges, especially via AI agent-powered customer services, according to Salesforce. (One third are very interested.) “With AI, consumers can begin a return with a digital agent to speed up the in-store returns process, or quickly make an exchange online,” Schwartz says.
This is one of the main ways in which retailers are using AI for returns, she says. “By deploying AI-powered agents, retailers can manage a high volume of returns more simply and seamlessly online, and free up their customer service reps to handle more complex, high-value cases.”
But implementing AI to its full effect will take time, and won’t curb the billions of dollars worth of returns to zero. An offset for the bottom line is to encourage less financially constrained shoppers to spend more, Schwartz offers. “With the right data analytics and insights tools, retailers can segment and incentivise their high-spending, low-returning customers to make more purchases with targeted offers or perks like free shipping or discounted bundles,” she says. “This can help offset the costs of other consumers’ returns and help to foster stronger relationships with a retailer’s most loyal customers.” It’s a bandage rather than a fix, but it’s better than nothing.
What about the consumers who want or need to return, but are hit by high fees or miss the window?
Retailers are looking to solve this, too. Loop (which caters to Shopify merchants) and Poshmark are offering a solution for unwanted purchases: the ability to easily upload and resell an item. Any Shopify merchant can opt in with the click of a button (labelled ‘resell via Poshmark’), enabling customers to resell their item via Poshmark if they miss a returns window, or if it’s final sale. The listing will be pre-filled, taking out the grunt work that typically prevents users from bothering with resale in the first place. So far, approximately a third of Loop’s top 150 brands have opted in, including Hill House Home, Rothy’s and Thirdlove. The goal is to reach 50 per cent in the coming months, says Jess Meher, Loop’s SVP of marketing.
Streetwear marketplace StockX offers a similar capability. Where returns were previously a non-option, customers can now resell a purchase directly on StockX. It’s not a return per say, but it takes a level of risk out of the purchase if the shopper knows they can offload it and get (most of) their money back with ease.
For now, Poshmark and Loop’s only offering is exclusively available to items that are not eligible for return. “Since these items are non-returnable, the brand doesn’t have to worry about lost revenue or increased returns, as they have already received full payment for them. And now, they can get even more incremental revenue [through revenue share from Loop/Poshmark] for those same items,” Meher says.
Brands are optimistic that, down the line, this new capability might help reduce returns. “Several brands have shared that they see this as a potential lever to reduce returns, because it enables them to implement shorter returns windows, knowing that shoppers will still have a fallback option,” Meher says. “Missed returns windows no longer need to be a frustrating dead end. It provides a more positive and flexible experience that aligns with brands’ evolving returns policies, which could help decrease overall returns volumes in the long run.”
Comments, questions or feedback? Email us at feedback@voguebusiness.com.
Correction: Updated to reflect that one third of Loop’s top 150 brands have opted in, not one third of all brands as previously reported.
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