Meanwhile, total retail sales also grew in January (2.34% year over year), according to the Retail Monitor. Month over month, January sales were nearly flat, decreasing just 0.16%, the new report showed.

“January sales continued the strong performance of retail sales in December, which is impressive coming off a record holiday season,” NRF president and CEO Matthew Shay said. “More importantly, year-over-year growth was solid, showing consumers are still optimistic and willing to act on the spending power brought by growing employment and wages. This is a great start to the new year.”

In December, total retail sales had increased 2.07% year over year and 0.44% over November.

January online sales and more

Online and non-store sales were among the six categories the Retail Monitor tracks that grew year over year in January. The other five:

• Health and personal care stores (up 9.7% over January 2023; up 0.51% over December 2023)
• Clothing and accessories stores (up 5.9% year over year; up 0.52% over December)
• Grocery and beverage stores (up 5.9% year over year; up 0.2% over December)
• Sporting goods, hobby, music and book stores (up 1.79% year over year, but down 0.65% compared to December)
• General merchandise stores (up 1.14% year over year, but down 0.64% month over month)

The remaining three categories the Retail Monitor tracks decreased sales year over year:

• Building and garden supply stores (down 1.55% from January 2023, but up 0.48% month over month)
• Electronics and appliance stores (down 4.21% year over year, but up 1.34% over December)
• Furniture and home furnishings stores (down 6.35% year over year, and down 0.97% month over month)

CNBC and NRF’s Retail Monitor does not include automobiles and gasoline in its total retail sales data.

The Retail Monitor calculation of core retail sales excludes restaurants in addition to automobiles and gas. Core retail sales increased 3.24% year over year in January but decreased 0.04% month over month. That compares with 2.4% and 0.19% increases year over year and month over month, respectively, in December.

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The results, which Temu released this week, are based on a survey it commissioned from Propeller Insights of more than 1,000 U.S. adults, aged 18 to 65. Propeller Insights conducted the survey in December 2023. This is the first survey Temu has released looking at the U.S. market, a Temu spokesperson told Digital Commerce 360 via email.

Pinduoduo owns Temu, which launched in 2022 and isn’t yet reflected in Digital Commerce 360 rankings. Pinduoduo operates an app-only marketplace for Chinese consumers. Because it doesn’t operate an ecommerce website, it is not included in Digital Commerce 360’s Asia Database.

Temu online shopping survey results

Consistent with findings from several Digital Commerce 360 consumer-insight surveys, Temu found that price is the top factor for nearly two-thirds of respondents (63.9%).

After price, product quality and delivery speed were the most important factors influencing consumers’ purchasing decisions, the data showed. Lower on the priority list were the brand’s reputation, online security and sustainability efforts, the spokesperson said.

78.4% of respondents said they compare prices online before purchasing products. Nearly three-quarters (73%) said they believe they get better deals online than in physical stores, and they prefer to shop online.

“Online marketplaces, which sell a vast range of products, are now more popular than individual retail brand websites,” Temu said in a report.

During the 2023 holiday season, just over a quarter (25.7%) of surveyed consumers shopped at online marketplaces. In comparison, a fifth (20%) shopped directly on retailers’ websites.

More than three-quarters of respondents (75.2%) said they are savvy enough to know which websites are safe and trustworthy to buy from. Nearly three-quarters (73.3%) said they read customer reviews to help determine if an ecommerce site is trustworthy, according to the Temu online shopping survey.

Temu and the social media effect

Social media also has an important impact on consumer selection of online shopping sites, Temu said in the report. It added that “every age demographic learned about Temu primarily through social media.”

“An interesting fact — when it comes to spending behavior, consumers make purchases out of personal interest rather than being influenced by what they see on social media,” the Temu spokesperson told Digital Commerce 360.

53.4% of respondents report not being influenced to buy something based on seeing someone else own it, the spokesperson said. And 53.9% will still make a purchase even if their peers advise them against it, the spokesperson added.

“While we didn’t obtain any data on which social media platforms are most popular for online shopping, we did find out which online shopping platforms were most popular,” the Temu spokesperson said. “Some of the top platforms that U.S. consumers preferred included Amazon, Target, and eBay.”

Amazon is No. 1 in the Top 1000, Digital Commerce 360’s ranking of the largest North American online retailers. Amazon is also No. 3 in Digital Commerce 360’s Global Online Marketplaces Database. It ranks the 100 largest such marketplaces by third-party GMV.

Target ranks No. 5 in the Top 1000. EBay ranks No. 6 in the Global Online Marketplaces Database.

Most and least popular shopping categories

The top three shopping categories during the 2023 holiday season, according to the Temu online shopping survey, were:

1. Clothing and accessories
2. Household items
3. Consumer electronics

Meanwhile, the least-shopped categories, according to the survey, were sports and outdoor equipment, along with pet supplies.

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Nonstore sales, which are mainly online, increased by 7.0% year over year in December. That’s according to the advanced estimate in the December monthly retail sales report from the U.S. Commerce Department. Total retail sales, including both in-store and online, grew 3.1% year over year. Those figures are not adjusted for inflation or seasonality.

Nonstore sales also grew 8.4% in Q4 2023 and 8.0% for the whole year, down from 12.8% growth in 2022.

The ecommerce addressable portion of total retail sales, excluding restaurants, fuel, and automobiles, grew 3.9% in 2023, according to Digital Commerce 360’s analysis of Commerce Department data.

Online sales contribute to December spending

Nonstore sales grew again in December, although not as quickly as they did in November. In November and December combined, nonstore sales increased 8.2%. That was bolstered by a strong holiday season. U.S. online holiday spending reached $221.1 billion in 2023, according to Adobe Analytics. The majority of that spending happened in November, which included the Cyber 5 period. But the remaining $98.6 billion in U.S. online sales were recorded in December. Retailer sales that continued past Cyber Monday drove some of that December spending, Adobe says. Online spending for the holiday season, including November and December, grew 4.9% year over year, Adobe said.

“Retail sales were stronger than expected in December,” said Ted Rossman, senior industry analyst at Bankrate, in a research note. “Bars and restaurants, health and personal care stores, electronics and appliance stores and motor vehicle and parts dealers all notched double-digit year-over-year gains,” he said. Gas stations, furniture stores, department stores, and building material stores were the only notable weak spots, he added.

Weak sales at furniture and home improvement stores have become the norm in recent quarters as consumers experience a weak housing market and postpone moving, hurting demand in the category.

The National Retail Federation responds

December results show a promising end to the year, according to the organization. 

“Consumer spending was remarkably resilient throughout 2023 and finished the year with a solid pace for the holiday season,” National Retail Federation (NRF) chief economist Jack Kleinhenz said in a statement. “Although inflation has been the biggest concern for households, the price of goods eased notably and was helped by a healthy labor market, underscoring a successful holiday season for retailers.”

The NRF also put out its own December sales estimate, the CNBC/NRF Retail Monitor using credit card data from Affinity. The report found that online and nonstore sales grew 31.17% year over year in December. It also found total retail sales grew 5.32% over the same period.

Other holiday spending in 2023

“Consumer spending was remarkably strong during the holidays, continuing a year-long trend,” Rossman said.

Total holiday results, from Nov. 1 to Dec. 31, largely mirrored December results. Electronics and appliances stores saw the largest gain, up 9.3% over both months compared to 2022. Health and personal care store sales also grew, up 9.0%. 

Those two categories, alongside nonstore sales, recorded the widest growth by far. The next category by growth was apparel stores, with sales up 3%.

The Commerce Department reports overall retail sales, including nonstore sales, every month. It reports retail ecommerce sales quarterly, with the fourth-quarter ecommerce report due out Feb. 20.

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That meant being creative with where merchants shipped orders from, and where consumers could pick up their online orders. And even when everything goes right, consumers are still bound to return some of their orders — especially after the holidays. In fact, shipping carrier Pitney Bowes plans to add almost 1,000 drop-off locations through a partnership with PackageHub as the current holiday returns season peaks.

Below, we recap some of Digital Commerce 360’s most insightful coverage about fulfillment and delivery in online retail from the past year. These stories highlight meaningful fulfillment trends among online retailers in 2023. Most notably, they include in-store and curbside pickup, retailers shipping from stores, outsourcing fulfillment to other companies, and the impact returns have on all these processes.

What we learned about fulfillment and delivery methods in 2023

How merchants cut shipping costs

In an era where online shoppers expect free shipping, retailers need to find more profitable shipping approaches, such as by changing packaging, negotiating with shipping carriers, changing shipping schedules or outsourcing fulfillment to a 3PL.  

Home Depot customers opt for ship to home — if the wait isn’t too long

Home Depot invests in its supply chain to cut costs and speed up delivery. As a result, more customers are opting to ship their orders to their homes. 

Keeping customers updated during the shipping process can make or break the experience 

Retailers say more communication is always better around fulfillment as consumers increasingly expect accurate, regularly updated information on their online orders.  

Pickup takes different forms, yet isn’t worth it for some retailers

Committing to curbside pickup — or breaking up with it

Retailers scrambled to launch curbside pickup during the pandemic. But now that many consumers resumed in-store shopping, retailers must determine if offering curbside is still worth it. 

Will alternate package pickup points take off?

Some retailers allow online shoppers to ship products to locations other than their stores or shoppers’ homes. The alternate fulfillment option can reduce package theft and offer convenience, but leaves the customer experience at pickup outside of the merchant’s control.

Office Depot delivers on 20-minute BOPIS promise

The office supply chain can have an order ready for pickup 20 minutes after shoppers order it online 98.9% of the time. 

Walgreens commits to pickup and delivery customers: ‘they spend more money with us’

Lindsay Mikos, senior director, retail omnichannel at Walgreens, told Digital Commerce 360 more than half its digital orders are same-day pickups. The retail chain’s omnichannel services were critical during COVID-19, but now, Walgreens customers continue to want the convenience of shopping online and either picking up in-store or having orders delivered to their homes. 

Tractor Supply 2022 conversion for BOPIS and curbside is 60% higher than home delivery

In 2022, Tractor Supply Co.’s conversion for buy online, pickup in-store and curbside orders was 60% greater than home delivery. 

Some retailers save on costs by shipping from store

Why some retailers use — and avoid over-using — stores as fulfillment locations

Today’s shopper is a hybrid in-store and online shopper. Retailers face logistical and fulfillment challenges to ensure inventory is there. Three retailers strategize how to divide orders between warehouses and stores to efficiently meet shopper demand. 

Apparel retailer Vince ‘pulls the lever’ on and off to use stores to fulfill orders

Apparel brand Vince LLC invested in software to navigate buy online, pick up in-store services, resulting in a 7% increase in BOPIS sales. 

Destination XL Group uses stores to help promote its website

Big and tall men’s apparel retailer DXL increased online sales 9.9% in fiscal 2022, which ended Jan. 28, compared with 2021. By cutting back on the brands it carries and selling private-label merchandise on marketplaces like Amazon.com, the retailer plans to continue to expand its ecommerce presence. 

Aviator Nation automates returns, uses stores to fulfill online orders

The California 1970s-inspired leisure wear brand Aviator Nation decreased its refund rate 11% by automating returns. The retailer also fulfills online orders through its 17 store locations. 

Outsourcing fulfillment can make it faster and cheaper

What is 4PL, and does your ecommerce business need one?

Family farm Palouse Brand cut fulfillment costs by 20% by working with Ware2Go, a fourth-party logistics UPS company, to streamline shipping. 

As orders mount, online men’s skincare brand outsources fulfillment, sells on Amazon

As demand grows, online retailer Black Wolf Skincare opts to outsource its fulfillment services and expand its reach by selling on Amazon. 

PacSun pilots RFID to improve inventory accuracy, reduce split shipments

With products tagged with RFID, PacSun store employees can quickly count inventory several times a week, a large increase from a few times a year. 

Retailers expect returns after holidays, but how do they handle them?

Online returns outpace in-store in 2023, NRF report finds

Online sales have an even higher rate of returns than in-store sales in 2023, according to a report from the NRF and Appriss Retail. And about 13.7% of returns (of online and offline orders) were fraudulent.

Retailers are in for a ‘tsunami’ of holiday returns this year: Salesforce

Holiday returns typically spike following Cyber 5, and then again right after Christmas, says David Sobie, CEO of Happy Returns.

How returns can be a retail ‘superpower’

A returns management CEO explains the valuable data behind returns. 

Retailers revisit return policies ahead of the holiday season

Retailers give shoppers an average of 30 days to return their products, and a large majority of retailers plan to make their return policies stricter in 2023, according to Salesforce data. 

Loop processes 60,000 returns a day during 2022 holiday season

The return-management software company said Dec. 27 was its busiest day, with 68,000 returns processed that day. 

Amazon will charge for some UPS returns, warn customers about frequently returned items

Some customers will have to pay a $1 fee to return orders at a UPS store if they have other options closer to home. 

Holiday returns decline as retailers raise fees

Return fees are more common, but extended returns windows are, too. 

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Together, the companies announced the launch of a new returns drop-off network, consisting of almost 1,000 PackageHub shipping locations. Those drop-off points will expand options for Pitney Bowes. It already offers no-label returns at 30,000 postal locations, according to its official numbers. The announcement states that the network will add “hundreds more” locations in the near future.

The no-box and no-label returns will be available to ecommerce brands using Pitney Bowes. These include the dog toy and treat retailer Bark, direct-to-consumer shoe brand Rothy’s and online marketplace Uncommon Goods.

Bark ranks No. 187, Rothy’s ranks No. 237, and Uncommon Goods ranks No. 910 in the Top 1000, Digital Commerce 360’s database of the largest North American e-retailers by online sales. Among retailers in the Top 1000, 10 use Pitney Bowes for fulfillment services. Meanwhile, 63 use it for international ecommerce services, and 104 use it as a shipping carrier.

Rising importance of drop-off locations for returns

Among the benefits Pitney Bowes is pitching with the expanded network are reduced exceptions during processing, fraud reduction, and consumer convenience. 14.5% of all retail sales were returned in 2023, according to a December report from the National Retail Federation and Appriss Retail. The report showed that returns for online orders outpace those for in-store purchases. It also estimated returned merchandise in 2023 to be worth $743 billion. Of that total, $101 billion was lost to returns abuse and fraud.

Image credit: Pitney Bowes

“Ecommerce returns are among the fastest-growing costs for retailers — costs that are sure to increase given the historic levels of online shopping we’ve seen this holiday,” said Gregg Zegras, EVP and president of global ecommerce at Pitney Bowes, in the announcement Wednesday. “We have the longest-standing ecommerce returns service in the industry — and now, with the launch of this network with our partner, PackageHub, we have access to their network of premium drop-off locations across the U.S., making this the most comprehensive returns service, capable of lowering the cost of returns while simultaneously improving the consumer experience.”

Staying competitive with no-label and box-free returns

No-label and box-free returns have also been offered as options at Amazon and Happy Returns. UPS announced plans in October to acquire the latter. That deal made Happy Returns drop-offs possible at 12,000 UPS locations. Pitney Bowes will hope to stay competitive against options like those and Amazon’s network, which includes Amazon Fresh, Kohl’s and Whole Foods locations.

“By aligning with Pitney Bowes, we are poised to deliver a premium returns experience to both merchants and consumers through PackageHub Returns, ensuring a mutually beneficial outcome,” said Brandon Gale, CEO of PackageHub. “The Pitney Bowes’ returns approach seamlessly complements our strategic vision, and we eagerly welcome them in the PackageHub family. We believe this partnership offers an incredible value-add to our ever-increasing network of PackageHub store owners.”

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The technology plays a role in how consumers decide what to purchase, and in how retailers facilitate those purchases. In addition, sellers use it to improve customer service and fulfillment efficiency. And the impact is already significant. Salesforce says that AI influenced 17% of all online orders made in November and December. It also says AI accounted for $194 billion in sales over the holiday season.

Salesforce arrived at that figure based on analysis of shopping data from 1.5 billion shoppers, says Rob Garf, vice president and general manager of retail. 

AI product recommendations are getting more accurate

Predictive AI for product recommendations was by far the most common use case for the technology, Garf says. Retailers have been using AI to make product recommendations for years, he explains. As the technology matures, it makes better recommendations that consumers actually use.

“AI is really only as good as the data that it is fed, and from our point of view, that data lives predominantly in a retailer’s own four walls,” Garf says.

Retailers have access to data about their customers’ preferences, shopping history, brand allegiance, return history and more, he states, so it’s all about using that data most effectively.

“Our research shows on average, consumers experience nine different touch points in any given shopping journey,” he notes. “So what AI is doing is helping smooth out that shopping experience by helping both the customer directly and as it relates to their shopping experience and the frontline employee.”

AI frees up employee time

Retailers also began to dip their toes into generative AI for more creative tasks, Garf says. He points to Salesforce clients using generative AI to create subject lines for email marketing campaigns over the holidays. An employee still oversees and edits the text, but doesn’t have to do the initial drafting. 

Verlo Mattress took a similar approach in the months leading up to the holidays, says Ira Klusendorf, vice president of marketing at Verlo. The mattress retailer prioritizes responding to online reviews within 24 hours as a key part of its customer engagement strategy. However, that can be time-consuming.

“Creative writing takes time. So the AI helps you be creative and effective [in a shorter amount of time],” he says.

Verlo uses generative AI to create appropriate responses to reviews, which are about 98% accurate to the brand’s voice, he explains. “We played with the brand voice,” which the brand uses “across the board,” he says. Verlo is now experimenting with AI-generated social media posts that could further free up employee resources to focus on other tasks.

Retailers use AI to be more efficient behind the scenes

In some cases, consumers weren’t necessarily aware of the extent to which AI was involved in their holiday purchases. For example, many of the largest online retailers incorporated AI across their fulfillment and logistics networks.

“[AI] is meant to be something you don’t see or feel, but it’s as critical as oxygen,” says Scott Hamilton, vice president for last-mile delivery routing and planning technology at Amazon, in a press release. “When you don’t realize it’s there, that means it’s working perfectly.”

The online retail giant uses AI to forecast what products will be in demand and coordinate which items to stock in which warehouses. Then, AI-enabled robots sort and inspect millions of packages at these warehouses before they’re loaded into delivery vehicles. The robots are trained using generative AI, which creates simulations of scenarios they might encounter during busy shopping periods, according to Amazon. That same technology allows the robots to map out Amazon’s fulfillment centers and become more efficient at navigating them as time goes on.

Walmart uses AI similarly, senior vice president of end-to-end fulfillment Parvez Musani says in a blog post detailing the company’s AI holiday plans. Walmart trains its AI using historical shopping data, online searches and page views to forecast demand and stock products appropriately. 

“We also consider ‘future data’ such as macro-weather patterns, macroeconomic trends and local demographics to anticipate demand and potential fulfillment disruptions,” Musani writes. “With this combined data, our engines identify and correct discrepancies, inefficiencies, or inaccuracies in supply chain models.” 

The system works in reverse, too. Walmart’s AI technology is sophisticated enough to disregard anomalies, such as highly unusual storms, to prevent muddying the data. 

Amazon ranks No. 1 in  Top 1000. The Digital Commerce 360 database ranks North America’s leading online retailers by their web sales. Walmart ranks No. 2.

Consumers were open to AI this year

While retailers actively incorporated AI into more parts of the selling process, consumers also showed interest, proving themselves willing to engage with the new technology. They had high expectations, too. 76% of respondents to a Talk Survey poll in November said that they expected to make fewer returns of holiday purchases because AI would help guide their purchases.

88% of consumers said they would use AI in some way for holiday purchases in the survey. That included chatbots and personalized recommendations, which were the most common applications for AI, according to Salesforce.

Consumer experience with AI in the 2023 holiday season might have implications for future uses. 68% of online shoppers say they would lose trust in a brand if it gave them poor recommendations. 53% said the experience would stop them from shopping with the retailer again.

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Some early numbers from the holiday auto sales period are already available. They indicate this season could bookend a year of improved sales, even if some results are mixed.

Projected 2023 auto sales

In 2023, total new car sales are projected to post a year-over-year increase of more than 10%. That would be the highest increase since 2019, according to Cox Automotive Inc. Cox operates Autotrader.com, an online marketplace for auto buyers and sellers. For used vehicles, about 35.9 million units are expected to be sold for the year. That would be fewer than the 36.3 million used autos sold in 2022, the company shared.

Online sales, meanwhile, have been on track to claim a larger share of the auto sales market. By 2025, online auto sales in the United States are expected to represent 18% of total auto sales, up from 9.7% in 2020, according to the consultancy Roland Berger LP.

Compared with 2022, early returns for the 2023 holiday shopping season indicate that online auto sales are on the rise. Cars.com reports that between Thanksgiving Day and Cyber Monday it saw a 6.4% week-over-week rise in new car searches. That was accompanied by a 4% increase in used car searches for the same period. Cars.com is operated by Cars Commerce, Inc. The provider of automotive marketplace technology claims to attract about 26 million visitors a month.

“Historically, we’ve seen an increase in engagement with automaker ad campaigns on Cars.com during sales events and a significant uptick in dealer leads, as in-market shoppers are motivated to find out more about deals on available vehicles,” says Rebecca Lindland, senior director of Industry Data and Insights for Cars Commerce. “Additionally, that uptick in searches on Cars.com points to active shoppers during the holiday season when many of these ad campaigns and sales events occur.”

Signals in used car sales

Sales of used cars also got off to a strong start in November. Cox Automotive says it saw a surge in auto sales on Autotrader.com beginning the Tuesday before Thanksgiving.

“Tuesday prior to Thanksgiving was one of our top five highest volume days for cars sold ever measured by sales contracts signed,” says Paulo da Silva, assistant vice president of operations for Cox Automotive Ecommerce. “On Black Friday we saw another top five highest volume day for cars sold ever.”

Cox Automotive also saw one of its three best days ever on Black Friday for funnel activity. “That strong funnel activity the week of Black Friday translated into November being the best month ever in terms of cars sold through our ecommerce platform,” da Silva adds.

The spike in volume on Autotrader.com heading into Thanksgiving and on Black Friday is a sign that consumers are making greater use of the online channel when purchasing a car, a Cox Automotive spokesperson adds.

Why it could be a December to remember

As the calendar flipped to December, early data indicates that consumers continue to spend on auto purchases. Interest can be seen in search activity. Cars.com saw that the first 11 days of the month were 5% busier than the first 11 days of November. That lift reflects typical seasonal buying patterns, Lindland says. One factor helping the surge in auto sales during December is that car companies are upping the ante when it comes to incentives. These are meant to encourage consumers to pull the trigger on purchasing an automobile, she adds.

Those boosted incentives have come as inflation led to higher prices and interest rates, including for auto loans, Lindland notes. “Some economic headwinds exist for consumers, but automakers are increasing incentives to entice shoppers with better finance terms and help offset high prices,” Lindland says.

With used car sales for 2023 projected to be slightly lower than in 2022, Lindland does not expect a year spike in the category. “December is a soft month for used vehicles as those would-be shoppers tend to allocate their wallet to holiday-related expenses, deferring vehicle purchases until they get their tax return.”

Expectations based on previous years

In average years, auto sales have risen in December relative to previous months, according to TrueCar.com. The digital marketplace connects buyers and sellers to a nationwide network of auto dealers. TrueCar.com says it does not have “mature data” yet for the 2023 holiday shopping season. Nevertheless, historical data confirms that trend. In December 2022, sales of new cars on the TrueCar.com platform accounted for 7.8% of sales for the month. That was up from 6.9% in November the same year.

“Monthly seasonal sales [in 2020 and 2021] were abnormal due to COVID/inventory shortages, but this year has been a little more stable, comparable to the 2015-2019 average,” says a Truecar.com spokesperson.

From 2015-2019 new car sales on the TrueCar.com platform averaged 9.2% for December, the company adds.

The uptick in sales during December coincides with an increase in incentive spending by automakers during the month. In 2022, automakers increased their incentive spending by 23.7 %, according to TrueCar.com data. The surge in incentive spending in 2022 followed a 4.6% decline in incentive spending in 2021. Incentive spending increased 4% in 2020 and 2019, respectively.

Are holiday promotions effective?

New car sales tend to be strong throughout December. Within the month, one of the most active periods for used cars is between Christmas and New Year’s Eve, according to Vroom.com. “It’s what many in the industry call the 13th month,” a Vroom.com spokesperson says. Vroom will not report sales for the fourth quarter of 2023 until early next year.

On the used car front, online used car retailer Carvana Co. does not traditionally see December promotions move the needle. “Where we see a real increase in sales is around tax season when consumers use their tax returns to purchase a car,” says a Carvana spokesperson.

Sales data from TrueCar.com supports that trend. In 2022, used car sales on the TrueCar.com platform accounted for 9.3% of sales in May. That was up from 9.1% in April. Used car sales as a percentage of sales dipped to 8.4% in June and 8.1% in July.

Challenging factors

While holiday auto sales look strong for 2023, the forecast for 2024 is that sales will slow slightly. That is due to high interest rates for auto loans, depleted inventory and fewer incentives from automakers, says Cox Automotive chief economist Jonathan Smoke.

“2023 has been strong and consistent for new vehicle sales and have been supported by improving supply levels and higher incentives,” Smoke said in Cox Automotive’s bi-weekly auto market report posted December 19. “But, for both the economy and auto sales, expect slow growth in the year ahead. One percent to two percent growth is about all we can expect, but it beats the alternative.”

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Holiday returns predictions

Salesforce says the rate of online purchases that were returned doubled the week following Cyber 5 and has remained high ever since. The software company and data vendor predicts more than $131 billion in holiday purchases will be returned.

That figure encompasses returns of purchases made globally in November and December 2023. It is based on returns patterns in dollars and percentages from the 2022 holidays and the rest of 2023, Salesforce says. 

Return rates will likely rise as high as 20% for a few weeks after the holidays into 2024 as people return gifts, says Rob Garf, vice president and general manager of retail and consumer goods at Salesforce. “After several years of spikes in holiday returns, we anticipate a slight increase from last year,” he says. In 2022, global returns grew to 13% of total orders in the holiday period, an increase of 63% year over year, according to Salesforce data.

Retailers largely corrected more generous return policies after the large increase last year to preserve profit margins, says Garf. “That said, we see retailers oversteering and negatively impacting customer service and experience. The returns experience must be easy, clear, and reasonable, or retailers risk brand loyalty and repeat purchases.” He adds that a positive return process can be the first step in a new shopping process for a consumer. Meanwhile, a poor experience can make it the last time a consumer interacts with the retailer. 

Reports of holiday returns so far

Online retailers report a mixed bag on returns as of the week before Christmas. Direct-to-consumer children’s apparel manufacturer PatPat’s returns as of the week before Christmas are comparable to last year at the same time, says head of marketing Ranu Coleman. They’re on track with PatPat’s expectations, and the retailer expects an “influx” in early January, after the holiday season. 

Meanwhile, women’s apparel retailer J.Jill is experiencing elevated return rates, CEO Claire Spofford told investors on Dec. 5. “The customer has become more discerning with their spending, particularly in certain categories,” Spofford said to explain the higher return rates. J.Jill implemented an updated fit guide to help customers find the right size before purchasing and alleviate some of the return pressure, the retailer said. 

Denim brand Pistola also reports higher than usual returns, the brand told Business of Fashion. The retailer is making real-time adjustments to the design of products with high returns, with the expectation that this year’s holiday returns could be 10% higher than in 2022.

David Sobie, CEO of reverse logistics vendor Happy Returns, says he expects return volume to break new records this season. “In an environment where people feel less confident in the economy, I think they’re just scrutinizing more what they keep,” he says of the reasons consumers appear to be returning a higher proportion of purchases this year.

Sobie says Happy Returns sees the number of returns peak at two times around the holidays. Once following the Cyber 5 period from Thanksgiving to Cyber 5, followed by a lull, then again about a week after Christmas. In 2022, the returns peaked over the six days after Christmas, reaching a high of 16%, according to Salesforce.

Impact of returns

Returns can be a costly problem for retailers. Companies pay an average of $26.50 to process $100 in returned merchandise, The Wall Street Journal reported in May. In 2022, about 16.5% of retail purchases were returned, totaling about $816 billion, according to the National Retail Federation. 

Rates are even higher for apparel, averaging 24.4% between April 2022 and March 2023, according to Coresight Research. That translates to about $38 billion in returned apparel in 2023, or the equivalent of all U.S. Cyber 5 spending this year.

The cost of processing a return of a specific item varies based on several factors, according to reverse logistics firm Optoro. For example, some apparel pieces may be out of style or out of season by the time the return is processed and cannot be sold for full price. 

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The post Retailers are in for a ‘tsunami’ of holiday returns this year: Salesforce appeared first on Digital Commerce 360.