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Record-breaking holiday returns expected as consumers remain wary of exchanging gifts in-store

In some cases, Walmart and Target are encouraging customers to keep or resell unwanted gifts — even after receiving a refund.
Image: A UPS worker organizes boxes to be delivered in midtown New York
A UPS worker organizes boxes to be delivered in midtown New York on Dec. 23, 2020.Kena Betancur / AFP - Getty Images file

The massive spike in online shopping during the pandemic has triggering a record-breaking number of returns, as consumers remain wary about exchanging items in a physical store.

Online spending grew 32.2 percent this past holiday season to hit a record total of $188.2 billion, according to new data from Adobe Analytics.

But not everyone got what they wanted this year. Last week, UPS announced it was expecting a bounceback of 8.75 million dismissed gifts — a 23 percent increase from last year — turning “National Returns Day” into “National Returns Week.”

According to the National Retail Federation and Appriss Retail, retailers are expecting 13.3 percent of merchandise sold during the holiday season to be returned, equating to an estimated cost of $101 billion, or one-quarter of the 2020 return total.

This surge is putting pressure on major retailers and carriers to ease the process — and headaches — for customers looking to stay home for the latter half of their retail therapy fix.

“89 percent of customers who have a bad online return experience say they won't buy again from that retailer online,” Tobin Moore, CEO and co-founder of returns solution company Optoro, told NBC News. “97 percent of them say that if they have a good returns experience, they're happy to come back and buy again.”

Amazon and Macy’s extended their holiday return deadline to the end of this month, while Walmart announced it is offering free FedEx pickup for returns.

However, catering to Covid-19 consumer behavior could come at a price.

The average return costs around 59 percent of an item’s original price, according to Optoro and real-estate and investment services firm CBRE.

“When these items come back, oftentimes they come back up to 30, 60 or 90 days beyond when they were purchased, causing them to be out of season,” said Andrew Hogenson, Global Head of Consumer Goods, Retail and Logistics at Infosys Consulting. “That's going to lead to significant markdown returns...markdowns are one of the categories that can drive profit issues for our retailers.”

In some cases, Walmart and Target are encouraging customers to keep or resell unwanted gifts — even after receiving a refund.

“Similar to other large retailers, in a very small number of cases when we determine it’s easier, guests who want to return items by mail may be refunded and encouraged to keep or donate the item rather than sending it back,” a Target spokesperson told NBC News.

“We make the decision for customers to ‘keep it’ based on a few things: customer history, value of the items and the cost of returns process,” Avani Dudhia, a Walmart spokesperson, told NBC News in an email. “It’s designed to mitigate the cost of the returns process and environmental impact, as well as create a better customer experience.”

Over five billion pounds of waste is generated from returns every year, according to Moore.

Meanwhile, carriers are still recovering from the holiday shopping season and working to prepare to handle the opposite side of it. FedEx, UPS, the U.S. Postal Service, Amazon Logistics and regional carriers delivered over 3 billion packages this past season — a new record — with over 2 million not being delivered in time for Christmas, according to ShipMatrix.

“While we don’t have a number for return projections, we are prepared to handle the volume. We are proud of the hard work and dedication of our employees, and will continue to work around the clock to deliver all packages and mail entered into our system,” a USPS spokesperson told NBC News.