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Retailers Look to Technology to Trim Holiday Merchandise Returns

Holiday return rates are three times the usual, costing sellers billions
People carry shopping bags along Broadway in New York on Dec. 2, 2013
People carry shopping bags along Broadway in New York on Dec. 2, 2013Photograph by Spencer Platt/Getty Images

With Christmas fast approaching, Stage Stores is busily stocking its 866 stores, in small towns and neighborhoods across the U.S., with the sweaters, dresses, and footwear that are gift-giving staples during the holiday season. But the Houston-based retailer is also preparing for a second, less-loved surge: that of the inevitable postholiday returns. Stage’s average rate of return throughout the year is about 7 percent of sales in its physical stores and about 11 percent online, adjusted for exchanges. Over the holidays, those figures grow. (Many merchants keep the exact increase a secret.) Says Steven Hunter, chief information officer at Stage: “Holiday returns for any retailer can be challenging.”

That’s an understatement. The Christmas season is a windfall for retailers, who book as much as 40 percent of their annual sales during the season, but many of those reindeer sweaters, neon socks, and micro-miniskirts in size 16 come back to haunt them. Post-holidays, retailers see triple the number of returns of any other time of year, says Jack Plunkett, chief executive officer of Plunkett Research. “We think something will fit or look good on us, and it doesn’t, and we send it back,” he says. The resulting pileups of returning merchandise, he says, “create a huge problem for the whole retail system.”