The clock is ticking for Amazon.com (AMZN 3.89%) and other retailers to reach their holiday sales targets. As the season reaches its final days, Amazon made an announcement this week that could lift sales during the last four shopping days before Christmas.
The company said it has expanded its free return program to include millions of items under 50 pounds, like electronics, household goods, and kitchen appliances. Previously, the policy only applied to clothing, shoes, and bedding. Customers can drop off their products to be returned at more than 18,000 locations, including retailer Kohl's and delivery giant United Parcel Service, and Amazon even offers a label-free and box-free option for some purchases. To make things even more convenient, Amazon's delivery calendar allows shopping as late as Dec. 23 to receive packages in time for Christmas.
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A flood of returns
Expanding free returns could be a winning move in the final days of shopping for two main reasons: Forecasts this year indicate most shoppers will be returning gifts, and in general, the ease of returns is an important factor for consumers.
About 77% of consumers surveyed by Oracle recently said they plan to return some of their holiday gifts. Almost 20% said they plan to return more than half of their gifts. And a separate survey from last year showed that customers consider the return policy before making a purchase, most likely because many of them know they will return items. Almost 40% of online shoppers say an online retailer's free return policy influences their decision whether or not to buy, according to an NPR/Marist poll last year.
Though making returns free and easy is a good way to attract customers, a high number of returns isn't exactly good news for a company. A Statista report predicted U.S. return deliveries will cost $550 billion by next year, up 44% from 2018. The bright spot here is that 96% of consumers would shop with a retailer again if the returns process was positive, according to data from a consumer report from Narvar, a company that focuses on improving customer experiences.
The biggest shopping day
Amazon is already a winner in the race for holiday dollars, even without this latest move. The retailer said Black Friday, the "official" start to the holiday shopping season, was its best ever, and Cyber Monday was the single biggest shopping day in its history. The company didn't provide sales figures, but it said global customers ordered "hundreds of millions" of products between Thanksgiving and Cyber Monday.
In spite of these signs of optimism, it hasn't been an easy year for Amazon. Shares have only gained 10%, and the company has missed earnings estimates the past two quarters. The stock is trading at 79 times earnings, while peers like Target and Walmart trade at 20 and 24 times earnings, respectively.
Still, analysts are bullish on Amazon, with a price target that represents a 21% upside. It's expected to report fourth-quarter earnings in late January, and potential investors will see if expanded free returns and spectacular performances on Black Friday and Cyber Monday translate into big sales gains overall.
