Holiday Returns Should Be a Goldmine for Brands

The National Retail Federation (NRF) projects winter holiday spending to increase by 2.5% to 3.5% over 2023, reaching between $979.5 billion and $989 billion, compared to $955.6 billion last year. With this surge in sales comes a corresponding rise in returns, which are expected to account for around 18% of total holiday purchases.

Many brands may see these returns as a logistical burden, but they represent a significant opportunity to engage customers and strengthen relationships. By focusing on a smooth, customer-friendly return process, brands can drive future sales and increase customer lifetime value (CLV). Returns can be a pivotal moment for customer engagement when handled thoughtfully, transforming what might seem like a negative interaction into a positive one.

Returns Start Early and Peak in January

While returns are often associated with post-holiday shopping, they typically begin in early November and steadily increase through December, peaking in January. According to data from Optimove Insights, the percentage of returns grows alongside purchases. For example, in January 2022, purchases were 2.2 times higher than the monthly average, while returns were 2.5 times higher.

This yearly trend provides brands with an opportunity to plan accordingly and prepare for the influx of returns. Rather than viewing returns as a hassle, brands should treat them as an important touchpoint for customer retention and relationship-building, especially during the busy holiday season.

Turning Returns into Retention Opportunities

Returns offer a unique opportunity to strengthen customer loyalty. According to Optimove Insights, customers who initiate returns have a retention rate of 26%, compared to just 13% for customers who do not return products. This suggests that customers who go through the return process are more likely to continue shopping with the brand.

This retention effect is not limited to existing customers. The data shows that new customers who return items have nearly the same retention rate as existing customers who do not return products. This highlights the importance of nurturing relationships with new customers who make returns. They are one step closer to becoming loyal, long-term customers.

In fact, existing customers who return items are among the most loyal, with the highest retention rates across all customer segments. For brands, ensuring a positive return experience is key to cultivating these relationships and turning returns into a tool for customer retention.

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The Importance of a Seamless Return Experience

The first step to capitalizing on the opportunity that returns present is creating a seamless return process. If customers find the return experience complicated or frustrating, they are less likely to shop with the brand again. On the other hand, a smooth, hassle-free return process can significantly increase the likelihood of future purchases.

Brands can improve the return process by simplifying return policies, offering free return shipping, and including pre-paid return labels in every package. The easier the process, the more likely customers will return to shop with the brand in the future. Positive return experiences help to build trust, which is a key driver of long-term customer loyalty.

The Power of Free Returns

Research shows that offering free returns has a significant impact on customer behavior. Seventy-eight percent of shoppers say they will buy more from a retailer in the long run if free returns are offered, and 84% of shoppers indicate they will not return to a brand if they have a poor returns experience. Furthermore, 75% of consumers say easy returns are a deciding factor in their choice of retailer, and 78% of consumers say they are more likely to buy from a retailer over time if free returns are provided.

These numbers make it clear that free and simple returns are essential to building long-term customer relationships. They are not just a perk—they are a critical component of a brand’s customer retention and sales strategy. Brands that invest in making returns easy and cost-effective will foster loyalty and increase the likelihood of future engagement with customers.

Sustainability in the Return Process

Sustainability is becoming an important factor in customers’ decision-making process when it comes to returns. According to a recent PwC report on holiday shopping in 2024, 87% of consumers expect retailers to process returns in a sustainable way, and 69% of consumers say they only shop at retailers that offer free returns.

The Optimove Insights Consumer Shopping Intentions report for Holiday 2024 also highlighted the growing consumer preference for environmentally conscious brands. In 2024, 79% of respondents said a brand’s commitment to environmental causes is important to them, up from 61% in 2023. Additionally, 76% of consumers are willing to pay a premium for products from environmentally responsible brands, a significant increase from 57% in 2023.

This data underscores the importance of not just offering free returns but doing so in a sustainable manner. Brands that incorporate sustainability into their return processes can build stronger relationships with customers who prioritize environmentally conscious practices.

Returns Provide Valuable Customer Insights

Returns provide an opportunity for brands to collect valuable customer insights. Marketers should use the return process to gather information about why customers are returning items, their preferences, and how the brand can better meet their needs. This data can be used to refine product offerings and improve the overall customer experience.

Additionally, the return process can be a moment to engage customers with personalized offers, such as recommending alternative products or promoting exclusive deals. By using returns as an opportunity to provide tailored recommendations, brands can turn returns into a meaningful interaction that strengthens the customer relationship.

Conclusion

Returns during the holiday season are not just a logistical necessity—they are an opportunity. Brands that focus on creating a seamless return experience and using the return process to engage customers can turn returns into a goldmine for building long-term customer relationships and increasing lifetime value. Through thoughtful return policies and post-purchase journey orchestration, brands can drive future sales, foster loyalty, and improve customer satisfaction.

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