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The $270 Billion Cost of Store Returns

Racked.com - December 22, 2014

We've all been there: standing in the customer service line at Target, a strategically re-packaged curtain rod holder in hand and an elaborately detailed excuse about the whereabouts of the long-gone receipt. Most of the time, though, that excuse isn't even necessary. A staggeringly lax returns policy is guaranteed at plenty of big box retailers; Sephora will happily reclaim open mascara bottles and perfume for a full refund, and Nordstrom's we'll-take-anything-back policy is practically legendary.

Unopened packages can usually go right back on the shelves, but when stores like Sephora guarantee a full refund on products customers have already used, those items can't just be restocked and sold as new. Merchandise returns accounted for nearly $270 billion in lost sales in 2013, according to a report published by The Retail Equation in conjunction with the National Retail Federation. During the holiday season, the NRF estimated that nearly one in three gift recipients would return at least one item, and holiday returns during that time accounted for nearly $60 billion in lost sales. So where does all that unsold merchandise end up?

Liquidators provide another way to funnel out returned merchandise. Liquidation.com stocks returned and salvaged goods from labels like Michael Kors, Louis Vuitton, and DKNY. It boasts that it saves one of its national retail partners from sending 100 million units of merchandise to landfill deposits every month.

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