Holiday spending binge is yielding unhappy returns

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 for stores, but it looks like the spending binge has given way to a holiday hangover.

Carson City stores, however, could escape much of the return headaches, according to Kohl's store manager MaryAnn Iverson.

"Shopping is a little different for people in Carson City," she said. "We have the same stores, but we're more of a retired community.

"I haven't seen anything that's abnormal with the returns so far, but we (Kohl's) have a lenient return policy to begin with. But we're fine."

Iverson has been with the Kohl's on South Carson Street since its opening in October 2010. She expects the most accurate numbers for holiday returns will come the weekend after Christmas, which falls on a Sunday this year.

Return rates spiked when the Great Recession struck and have stayed high. For every dollar stores take in this holiday season, they'll have to give back 9.9 cents in returns, up from 9.8 last year, according to the National Retail Federation's survey of 110 retailers. In better economic times, it's about 7 cents.

This time of year, fractions of a penny add up. Stores are expected to ring up $453 billion during the holiday season. Merchants make up to 40 percent of their annual sales in the last two months of the year.

Returns are typically associated more with January than December. After all, that hot pink sweater with yellow stars on the sleeves may not be exactly what your sister had in mind. 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," says 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.

Consumer electronics in particular are being returned at a rapid clip. Stores and manufacturers are expected to spend $17 billion re-boxing, repairing, restocking and reselling electronics this year, up 21 percent from four years ago.

At about 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 percent to 15 percent, two percentage points higher than last year and double the rate in better times.

Its four warehouses across the country are packed with thousands more smartphones, TVs 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 extra stuff, the company says it is holding 20 percent more online auctions than it did last year, though it declined to give a total.

"This is going to be a record year for returns," Angrick says. "People are still reluctant to spend." t