NEW YORK -- Ah, the warm feelings of the holidays: Comfort and joy. Good cheer.
And buyer's remorse.
People who rushed to snag discounts on TVs, toys, and other gifts are quickly returning them for much-needed cash. The shopping season started out strong, but it looks like the spending binge has given way to a holiday hangover.
Return rates spiked when the Great Recession struck and have stayed high. For every dollar that stores take in this holiday season, they'll give back 9.9 cents in returns, up from 9.8 last year. In better economic times, it's about 7 cents.
Stores are expected to take in $453 billion during this year's winter holidays. Merchants make up to 40 percent of their yearly sales in the last two months.
Returns are typically more associated with January than December. But these days, more is going back before it ever gets to Santa's sack.
"When the bills come in and the money isn't there, you have to return," said Jennifer Kersten, 33, of Miami. She spent $300 the day after Thanksgiving on books, movies, and clothes for her nephews. Last week she returned half of it.
Some reasons for the many unhappy returns:
Shoppers are bingeing on big discounts. Stores are desperate to get people in the door. But the same shoppers who find "60 percent off" too good to resist may realize at home they busted the budget.
Stores have made it easier to take things back. Nordstrom is letting online shoppers return items at no extra charge this year. It used to charge $6. Other stores are offering more time to return or rolling out "no questions asked" policies -- no tag or receipt required.
Stores are undercutting each other in a tough economy. Wanda Vazquez spent $39.99 on iPad speakers for her 12-year-old daughter, then returned them when she found something similar for $16.99 at another store.
Consumer electronics in particular are being returned rapidly.
Stores and manufacturers are expected to spend $17 billion reboxing, repairing, restocking, and reselling electronics this year, up 21 percent from four years ago.
At half of the 100 electronics manufacturers and stores surveyed by Accenture, a consulting firm, return rates have increased over the past three to five years. Most of the items are returned without flaws.
In an industry where profit margins are thin and competition is brutal, those return rates are unsustainable, says Mitch Cline, managing director of Accenture's electronics and high-tech group.
Liquidation.com, which buys returned merchandise from big stores like Wal-Mart and auctions it to small businesses and dollar stores, says return rates are 12 to 15 percent, up two percentage points from last year and double the rate in better times.
Its four warehouses across the country are packed with thousands more smart phones, TVs, and other holiday castaways than a year ago, says Bill Angrick, CEO of the site's parent company, Liquidity Services.
To get rid of all that stuff, the company says it is holding 20 percent more online auctions than last year. "This is going to be a record year for returns," Mr. Angrick says.
Stores are already squeezed by rising costs for materials and labor. Returns make it worse. When a sweater is returned, a paid worker restocks it. Return a computer after just turning it on, and the hard drive has to be scrubbed.
It adds up to lost dollars for stores, which eat as much as 12 percent of the cost for returned clothes and 50 percent for returned electronics.
First Published December 15, 2011, 5:27 a.m.
