Lisa Katz| Crain’s Detroit Blog

With another shopping-crazed season coming to a close, retailers are dealing with the holiday aftermath and totaling up this year’s numbers.  So…how did it go?

Beginning with the simple statistics, the holiday season was a bit disappointing for retailers. Sales, though projected to increase by 3.9%, only increased 3.4%. In the final moments before Christmas Day, consumers benefited from the failure to reach sales goals as retailers deepened discounts to boost sales. The tactic worked as the last week in December saw the biggest jump in traffic and sales in the season thus far. Markdowns will continue throughout January, according to the Johnson Redbook Index, as “missed sales targets imply inventory overhangs which must be cleared before the spring season starts.” Shoppers should be on the lookout for clearance specials at their favorite stores!

Stores are still optimistic that they will continue to see the fruits of their holiday labor as gift cards are redeemed.  Gift cards do not count as sales until they are redeemed, so the positive effect is often delayed into late December and January.

The National Retail Federation has confirmed that gift card giving and spending is reaching an all-time high at over $28 billion and an overall increase of 4%. It is also likely that as shoppers come in for redemption, they will spend more than what is on the card which means additional revenues for the industry. Department stores and restaurants are likely to see the biggest gains, but coffee shops, electronics stores, and online retailers are also expecting additional sales.

These gains, however, may be offset by holiday returns and return fraud. A recent survey by Accenture found that 39% of people surveyed said that they would return and repurchase an item if they found it at a lower price than what they paid originally. In addition, 45% plan to use ad or price-matching tools, and 24% plan to take advantage of extended return policies.  However, 64% of consumers say that they returned zero gifts last year; it will be interesting to see how that number changes this year.

Returns affect stores in a number of ways and present “hidden losses” that can be dangerous to a company’s bottom line. Staff time spent processing returns or exchanges, restocking with markdowns (especially with holiday-related products as they are past peak selling time), credit and debit processing fees, and disposing of non-sellable and defective items are all ways in which returns significantly affect holiday profits.

Worse still, return fraud is simply out of control. Retailers are expecting to lose $3.4 billion to return fraud over the holiday season alone ($8.76 billion for the year):  5.8% of holiday returns this year are fraudulent, i.e, returning stolen merchandise, returning merchandise purchased on fraudulent or stolen tender, counterfeit receipts, and even employee return fraud or aiding an outside source to commit fraud.  Stores also experience a high volume of “wardrobing” or returning used, non-defective items after wearing or using for a special occasion.

Retailers have been attempting to crack down on all forms of retail fraud, so shoppers should not be surprised if they are asked for identification or told they can only receive in-store credit for your return. According to the NRF, on a scale of one to five (one being not effective at all and five being highly effective), retailers rate their efforts to deter fraudulent returns at a 3.55. The good news for retailers (and their employees!) is that 91% of consumers say that they find return policies to be fair.

Overall, the holiday season has been one full of ups and downs as our technology advances and shopping becomes more (or is it less?) complex.  A little sales increase is better than none at all, and hey—there’s always next year.

This blog was compiled with research and content from Sarah Sebaly, Project Manager – Strategic Pathways, Workforce Intelligence Network.

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