Mastercard estimates that this year’s holiday season spending grew by 3 percent, with online sales jumped a whopping 49 percent over 2019.
For the weeks leading into Christmas, it was almost impossible to avoid local or national news about shipping delays, especially at the US Postal Service. There are likely even more packages in the mail today that many shoppers hoped would have arrived by December 15.
FedEx and UPS managed the onslaught of shipments better by not accepting packages from shippers if they went beyond their estimated pre-season requirements. Amazon, for the most part, was also spared from bad shipping delays; relying heavily on its Amazon Flex service, restricting seller inventories before the season started, and having invested billions into its logistics network, especially after being caught out in March when the COVID pandemic started.
To add more troubles for many small business sellers, a major winter storm in the northeastern US added to the shipping chaos, prompting a third eBay note to sellers about protecting them from negative feedback due to shipping delays.
But it is too early for business owners to count the profits
With the record online sales for this holiday season as more shoppers opted to purchase holiday gifts online, 2020 will also very likely go down as the biggest returns season ever.
According to data from online fulfillment service Ware2Go, the return rate for online orders is typically 10 to 12 percent higher than in physical stores. During the holiday season, the online return rate is another 10 percent higher. Furthermore, a recent Ship2Ware consumer study shows that 88 percent of American expect to make holiday gift returns and 54 percent expect to do so within 2 weeks after the holidays.
Returnly, a post-purchase payments company that enables frictionless returns, already saw a 47 percent jump in returns the one-week following this year’s Black Friday weekend with Intimates/Underwear (+134%), Household/Furniture (+36%), and Apparel (+21%) being the leading categories.
For years, UPS and others have predicted “National Returns Day,” the day most shoppers return holiday gifts, to be right after the New Year. But Returnly estimated in 2019 and again this year that December 26 may be the biggest return day. Regardless of the actual day, the “returns season” has started and it will impact seller profits.
The Amazon effect rules returns
Returns have been a complicated situation for many small business online sellers, especially if selling on marketplaces such as eBay, Amazon, and Etsy.
Most of the top marketplaces now force return policies on sellers which is already a major grievance among veteran sellers, but the potential scope of holiday season returns will likely surprise many new sellers.
This year, Amazon extended its return policy for virtually all purchases between October 1 to December 31, 2020, until January 31, 2021, effectively allowing up to 120 days for items to be returned.
While other marketplaces may limit returns to 30 days, the consumer expectations brought on by Amazon’s liberal return policies could result in buyers asking for returns or refunds well beyond the 30-day limits set by other marketplaces. This could also result in some buyers making claims that items are not as described to credit card companies, which could force a late return. In rare cases, credit card and digital payment services such as PayPal may allow chargebacks up to 180 days.
With a large number of new online buyers, with record online sales due to the COVID pandemic, this year’s returns season is set to be a record breaker as well. For many small sellers, this can mean many returns and refunds which will impact the bottom line and cash flow, especially during January. The true profit of the 2020 holiday season may not be known until the end of January 2021.
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