Retailers struggle to handle holiday returns amid high costs and labor shortages

Holiday shoppers expect free returns on their unwanted holiday gift items, but retailers are struggling with how to handle returns this season.

According to a new CBRE-Optoro report, the average holiday return will cost retailers two-thirds of the original price for the item.

"It's the labor cost to actually take in that return, to warehouse the items" says business strategist and MBA/CEO of Sage Marketing Advisors, Dan Klein.

He says warehousing costs, transportation issues and the COVID-19 pandemic are contributing to the rising cost of returns but that the current labor shortage is largely to blame.

"If you have a certain amount of workers, you'd want them to focus on selling your products and processing customer orders. When you then have to process returns with a limited amount of workers, it creates stress for the company and that can affect the profitability," Klein explains.

The increased cost of processing returns has some retailers reportedly opting for the "just keep it" policy.

One shopper told News 12 Long Island furniture and home-goods company Wayfair told her to keep the item that she wanted to return.

"Wayfair is a good example. So, that's a company that's set up for distribution to send out their products, so when you send back products, it's a whole separate process for them, and it might actually be cheaper for a company like Wayfair for the customer to keep the product," Klein says.

Klein adds that returns do have a bright side: A good return policy can help create loyal customers.

Business experts recommend that consumers look up reviews of a retailer's return policy before buying a gift or other item from a store.