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The Ghost Economy: Why Retailers Should Fear Returns

Retailers lose more than $600 billion worldwide to sales returns annually

July 7, 2015 | Retail & Ecommerce

Retailers are losing a lot to what IHL Group calls the “ghost economy”—returns, out-of-stocks and overstocks. In a report focused on the returns component of that figure, IHL Group estimated that worldwide, retailers lose more than $600 billion each year to sales returns.

Average Annual Sales Returns Worldwide, by Region (billions)

The largest chunk of the total is lost by retailers in North America, according to the report, with retailers in Europe and the Middle East not far behind in losses.

For in-store purchases, the greatest losses worldwide came from people buying the wrong item or from issues with poor quality. Together, those reasons accounted for $183.0 billion in returns. Reasons for returning ecommerce orders were somewhat different: Items in the wrong size were the biggest culprit, followed by simple buyer’s remorse.

Reasons for returns also varied by geography. In North America, defective and poor-quality items were by far the biggest source of returns, accounting for $62.7 billion.

Retailers, of course, want to minimize their returns, which aren’t helping the bottom line. But on the consumer side, easy returns are key to a comfortable shopping experience. That’s one reason nearly half of retailers worldwide offer the option to return or exchange purchases in-store, according to April 2015 data from KPMG and The Consumer Goods Forum.

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