Consumers can easily return apparel they bought online by mail but this poses a new set of problems and challenges for retailers not used to this trend: it’s expensive.
More often than not, when a consumer sends back something they bought they don’t like it ends up being discarded. This represents an “enormous cost” to companies as it not only loses out on a sale but needs to throw a product in the trash, retail pro Jan Kniffen of J. Rogers Kniffen Worldwide told CNBC Monday afternoon.
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Sometimes consumers buy two or even three of the same items in different sizes under the assumption one will fit well. This has been a necessary trend as consumers cannot or don’t want to visit a store to try on an item in-person.
“The online [sales] are growing so fast that obviously the returns are growing dramatically and that’s really putting pressure on the bottom line,” he said. “It’s hard to get the same profitability out of an online sale as an in-store sale and a big piece of that reason is the returns.”
These margin-dilutive challenges are unlikely to ease anytime soon, even in a post-COVID era. Companies that sell items at higher price points like Nordstrom, Inc. (NYSE: JWN) can handle these challenges a lot better by adding a few extra dollars to each other.
Kniffen is predicting that once 2021 rolls around, the number of store closings and retail bankruptcies will accelerate again, according to CNBC. Looking a bit forward to April, the retail expert believes that apparel, accessories, and shoe sales will become “explosive.”
Some investors are right to question Kniffen’s outlook as April will likely come around a lot quicker than we would want to believe. There is a lot that can go wrong over the coming months, most notably a potential stall or setback in the COVID-19 vaccine rollout.
But taking a look at some of the malls during this holiday season and it is obvious that people want to go out and shop, he said. And these people and many more will likely want to shop at stores in the coming months.
“On the first pretty Spring day in April, you are going to look in your closet and you are going to say ‘I hate all my stuff’ and I’m about to start going places,” he said.
This thesis holds true for both women and men who are “just as fed up” with the inability to visit a mall and buy something to replace their work-from-home sweatpants.
“That’s going to happen, it’s human psychology,” he said. “We are going to see it.”
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