Data and Insights Show How COVID-19 Is Changing Consumer Habits

The holiday season typically brings the biggest sales—and corresponding returns—for retailers. With this year’s exponential growth of eCommerce and uncertainties over in-store shopping due to the sharply rising number of COVID-19 cases, our data shows that 80% of holiday shopping will be done online.

Data and Insights Show How COVID-19 Is Changing Consumer Habits. Photo by Artem Beliaikin
Data and Insights Show How COVID-19 Is Changing Consumer Habits. Photo by Artem Beliaikin

With this year’s rapid acceleration of eCommerce and the quickly rising number of COVID-19 cases this fall, our data shows that 80% of holiday shopping will be done online. And with eCommerce returns rates at nearly 3x that of in-store purchases, retailers will potentially face more returns than ever before. This article reveals more findings from our recent survey of over 2000 US consumers, and understand how, when, and in what amount your customers plan on returning holiday purchases.

In this article, Optoro discusses the results of a survey of over 2000 US consumers to understand how they plan on shopping for and returning holiday purchases. In it, you’ll learn:

  • The rate of returns retailers might expect, and when to expect them.
  • The methods in which consumers now prefer to return items
  • How retailers can meet consumers’ changing expectations this holiday season

Table of contents

What to expect from this holiday season is the question on every retailer’s mind.
How Many Returns Can We Expect? And When?
So when can retailers expect this influx to begin?
How Retailers Can Prepare
How Do Consumers Want to Return Purchases This Year?
The Impact of Gender and Age on Returns Preferences
How Retailers Can Prepare
Conclusion

What to expect from this holiday season is the question on every retailer’s mind.

We’ve witnessed stores shuttering, and then reopening with a slew of new processes and procedures to keep shoppers safe. We’ve seen the growth of eCommerce rapidly accelerate, and nearly double. The Commerce Department reported that in Q2 of this year, eCommerce spending increased by 44% over the same period last year.

This growth shows no sign of slowing, and as a result, most retailers can expect a very eCommerce-heavy holiday season in 2020. To understand just how this might pan out, we ran a survey of over 2000 US consumers in October and have outlined those findings in this report. Not surprisingly, we found that 80% of respondents plan on doing the majority of their holiday shopping online. This constitutes huge growth since last year, in which eCommerce comprised 19% of all holiday shopping. Such a significant change in consumer behaviour presents retailers with many challenges, particularly when it comes to returns, which can be complex, to begin with.

Understanding consumer preferences this holiday season, especially as they relate to returns, will be critical to success. In this report, we outline the findings of our October survey to help retailers understand how to strategize for the 2020/2021 holiday returns season by discovering how and when consumers plan to return their items this year.

How Many Returns Can We Expect? And When?

Most notably, our survey found that 80% of consumers say they will do the majority of their holiday shopping online this season. With eCommerce returns rates up to 30% higher than brick-and-mortar returns – which have an average return rate of 10% – retailers can expect significant changes this holiday season. But how many returns can we expect? Doing some simple math, we could see at least 24% of all holiday purchases end up being returned. That’s nearly 1 out of every 4-holiday purchases!

And what’s more, in our earlier research, 66% of consumers reported that they returned at least one holiday gift this past holiday season. Add that to the equation, and that number could be much higher.

So when can retailers expect this influx to begin?

Typically the return season starts in earnest after the holidays. This year, our survey results indicate that we may see an extended timeframe that starts earlier and ends later. The later-than-usual Amazon Prime Day turned into a pre-holiday ordering day that triggered several other retailers like Target, Best Buy and Walmart to run offers as well.

Perhaps correspondingly, our survey findings show that shoppers are starting holiday shopping earlier than usual this year. At 48%, nearly half of consumers have either already started holiday shopping or plan to start earlier than last year.

As for when they’ll be returning, two-thirds of consumers (76%) plan to return unwanted holiday gifts in the month after Christmas, but nearly a quarter (24%) plan to return in the month leading up to the holidays.

  • 80% of consumers plan on doing their holiday shopping online
  • 3x online returns vs brick-and-mortar returns
  • 2/3 of consumers return at least one-holiday gift they receive during the holiday season
  • 1 in 4 of all holiday purchases could be returned this year

When do consumers plan on returning unwanted gifts?

  • 46.4%: Within the month after Christmas (Jan. 4 – 25)
  • 24%: Up to a month before Christmas (Nov. 25 – Dec. 25)
  • 10.1%: The day after Christmas (Dec. 26)
  • 19.5%: The week after Christmas (Dec. 27 – Jan. 3)

How Retailers Can Prepare

With the potential for this massive influx of returns, retailers will need to ensure they have the infrastructure in place to process it. Due to warehouse safety regulations that require adequate social distancing, processing times may be slower than usual. Retailers that can automate decision-making and returns routing will be able to move inventory back to stock at a much quicker pace, enabling them to resell returned inventory at the highest possible profit. Streamlining the returns process also allows workers to focus more on forwarding fulfilment.

How Automated Decision-making Works
How Automated Decision-making Works

It will also be important for retailers to convert returns into exchanges and repurchases. We recommend that retailers invest in online returns portals that incentivize customers to exchange items right away by receiving instant credit for repurchases. We’ve seen that offering this option to customers can result in a 32% lift in average order value, providing retailers with critical savings at the point of return.

How Do Consumers Want to Return Purchases This Year?

One of the most drastic changes we have seen over the course of this year is how consumers are returning their purchases, and what their returns preferences are. Before the pandemic started, we found that 66% of consumers preferred to return items (regardless of how they were purchased) in stores. In May, a few months into the pandemic, we found that 44% of our respondents indicated they wouldn’t feel safe returning to stores and would prefer other returns methods.

In that same May survey, we found that 31% of consumers mailed in return or dropped it off at a third party location during the first few months of the pandemic. By October, 60% of consumers reported returning their online purchases via mail or dropping them off at a third-party location.

Consumer preference to return via mail or third party drop-off:

  • 31% May
  • 60% October

Drilling down into the online returns experience, our October survey asked consumers what the most convenient part of an online returns process is (online returns portal, scheduling pickups, curbside returns, etc.). Despite the growth of mail-in returns, the data shows that the majority of consumers prefer the ability to drop off package fewer returns to either retail stores or third party locations. Online returns portals that allow consumers to initiate a return online were also ranked as extremely helpful.

The most convenient features of an online return experience:

  • 12.1%: Scheduling a returns pickup
  • 30%: Using an online returns portal to start a return
  • 15.4%: Contactless drop-off in-store (returns-only check-out lanes or curbside returns)
  • 42.5%: Packageless returns (no box or label needed)
The most convenient features of an online return experience
The most convenient features of an online return experience

And in asking what part of the online returns process is most painful, most consumers indicated that packaging a returned item causes the biggest headache.

The most frustrating features of an online return experience:

  • 28.1%: Re-packaging the item
  • 27.3%: Taking the item to the post office
  • 17.2%: Printing a shipping label
  • 22.1%: Waiting for a refund to be issued
  • 5.3%: Tracking the status/location of an item as it is being returned
The most frustrating features of an online return experience
The most frustrating features of an online return experience

The Impact of Gender and Age on Returns Preferences

Consumers seem to be adapting to an increasingly online world, but there are still many consumers that prefer to return items they bought online to a physical store. Men tended to prefer in-store returns at 54%, compared to 45% of women who preferred that method. Surprisingly, we also found that younger consumers were the most likely to prefer returning to stores.

Whether or not the consumer prefers to return in stores, via mail or to a drop-off, it’s important to ensure that they feel comfortable and safe when making that return. Doing so can even drive customer loyalty and increase repurchase rates. At 47%, nearly half of consumers stated that they were actually motivated to buy again from retailers that offered contactless returns.

Do contactless returns features motivate consumers to purchase again?

  • 47.1%: Yes
  • 18.8%: No
  • 34.1%: Never done a contactless drop-off return

How Retailers Can Prepare

Offering convenient and safe returns methods will be critical to maintaining customer loyalty and ensuring that returns convert to exchanges this year.

Most consumers indicated that they are looking to initiate returns through online portals and to drop off returns without having to package them up to ship back. Consider investing in returns portals that allow customers to exchange or repurchase their items seamlessly, and that generate a simple QR code for them to bring to a returns drop-off location. Enabling this package less returns experience not only drives greater customer loyalty, but it can also save retailers the cost associated with returns.

Free returns shipping has become table stakes. In our most recent survey in October, we found that nearly half of consumers have decided not to purchase something due to the lack of free returns shipping. With shipping rate increases this year, offering free returns can be more of a financial burden than in years past. Allowing customers to drop off unpackaged returns gives retailers the ability to consolidate the shipments that come back to their facilities.

Conclusion

While this holiday returns season will come with a lot of uncertainty, one thing that will remain certain is that gift recipients will want to return unwanted items. And with the growth of eCommerce and its associated return rates, it will likely be in large numbers. Retailers will need to navigate processing a higher volume of returns than usual, and also ensure that they are offering convenient and safe returns methods for their customers.

Retailers who embrace the changing consumer behaviours and returns habits by seeking out new returns technologies, processes and procedures will have a competitive advantage not only this year, but as the retail landscape continues to evolve.

Source: Optoro

Published by Silvia Emma

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