Retail sales fell 0.6% in November 2022 compared to the previous month, though they were up 6.5% from November 2021, according to Commerce Department data. The decline occurred despite muted inflation of just 0.1%, according to the Bureau of Labor Statistics’ Consumer Price Index (CPI).
Certain areas were hit harder than others. Department stores saw a 2.9% decline, furniture and home furnishings stores reported a 2.6% decrease and building materials and garden centers fell 2.5%. However, food and beverage retailers reported a 0.8% increase in sales, while health and personal care stores saw a 0.7% increase. Overall online sales fell 0.9%.
The mild monthly inflation figure only tells part of the story, since the CPI’s reported year-over-year inflation rate was 7.1%, which weighed significantly on shoppers’ wallets. However, there is some good news for retailers. The National Retail Federation (NRF) and Appriss Retail projected that the 2022 returns rate will remain at 16.5%, nearly even with the 16.6% experienced in 2021. Additionally, the online return rate fell from 20.8% last year to 16.5% this year.
While this still means retailers will need to handle $816 billion in returns, the upside is that the rate of returns has not kept pace with growing sales. Every $1 billion in sales incurs $165 million in merchandise returns for the average retailer, according to the report. Additionally, for every $100 in returned merchandise, retailers lose an average of $10.40 to return fraud.
NRF expects $3.66 trillion in brick-and-mortar sales for 2022, with $603 billion returned and $62.1 billion (10.3%) of those returns fraudulent. Digital sales are expected to hit $1.3 trillion and generate $212 billion in returns, with $22.8 billion (10.7%) fraudulent.
Half of retailers that experienced return fraud cited returns of used, non-defective merchandise, also known as wardrobing or bracketing. Another 41.4% cited the return of shoplifted or stolen merchandise, and 20% attributed return fraud to organized retail crime.
NRF expects a small bump in returns at the end of the year with 17.9% of merchandise returned, reaching nearly $171 billion. Nearly 44% of survey respondents indicated they planned to hire more staff to handle returns during the holiday season, and 71% of these retailers intend to add staff specifically for stores.
“The holidays typically include a spike in retail activity, but higher return rates can also impact profitability,” said Steve Prebble, CEO of Appriss Retail in a statement. “Retailers must look for ways to individualize the returns process through data-driven insights. This will minimize the risk of accepting fraudulent returns while enhancing the customer experience for loyal shoppers.”