For U.S. retailers, December isn't just the holiday shopping season. It's also holiday return season, when consumers decide to send back all the stuff that didn't fit, work or meet expectations.
It's an expensive ritual. According to the National Retail Federation, returns account for around 8 percent of total annual retail sales. Online retailers face an even heavier burden, with returns averaging 25 percent of all goods purchased and as much as half of apparel. If those percentages hold through the 2017 holidays, online retailers could face $32.1 billion worth of returns on projected holiday-season sales of $107 billion, according to the consulting firm CBRE.
That's a heavy expense, and one reason that online retailers are proving to be less profitable than the stores they are trying to replace. In part, the problem is that online retailers traded one set of expenses — storefront real estate — for costs that can turn out to be higher.