South Korea’s annual parcel shipping volume reached 5.06 billion last year, up 52.9% compared to 2020. This surge translates to an average of 100.4 parcels per person annually, ushering in what analysts are dubbing the “era of 100 parcels per person.”
Analysts attribute this milestone mainly to a sharp increase in product returns. “Returns now account for around 10% of all parcel deliveries,” said a domestic parcel delivery firm official. As of last year, roughly 500 million parcels had been returned.
Returns tend to increase in December as customers purchase more clothing for the holiday season and year-end gatherings. “December is ‘peak return season’ when customers frequently return items like clothing after purchase,” said a fashion company representative. “We’re just hoping the return rates don’t rise further, considering sales have not been so good.”
The surge in returns has given rise to a burgeoning “return business,” with specialized agencies handling returns and new insurance products designed to cover sellers’ return costs.
While product returns are not new, recent changes have made the process easier. Previously, customers often had to bear the cost of round-trip shipping, which discouraged returns. Recently, companies have been racing to offer free return services to retain customers.
Naver Shopping, for instance, allows users to select a “Free exchange/return” option for shipping. Selecting this option reveals a seemingly endless array of products eligible for free returns, categories spanning from clothing to food and stationery. Even a packaged kimchi product is advertised with a “one-time free return if it doesn’t taste good.”
The home shopping sector, known for its early adoption of free return policies, has seen a steady rise in return rates. Hyundai Home Shopping’s return rate rose from 10.3% in 2020 to 10.7% in 2021, 13% in 2022, and 14% last year. GS Shop, CJ OnStyle, and Home & Shopping also experienced similar increases in return rates over the past three years.
A Korea Chamber of Commerce and Industry report pointed out that the rise in returns drove parcel shipping growth in the past few years. “Free return services, introduced by major e-commerce platforms like Coupang and Naver, have contributed to a surge in return volumes,” the report explained.
“As free returns become the norm, the perception of ‘order once, return later’ has taken hold,” said a representative from an e-commerce company. “Around 20% to 30% of all orders are returned.”
The rise in returns is proving costly for retailers. When an item is returned, companies must collect, inspect, and categorize its condition. “Handling returns involves a lot of manual labor,” said an e-commerce company representative. “Processing returns costs 1.5 times more than the initial shipping fee of 5,000 won.”
Coupang, Korea’s leading e-commerce giant, raised its monthly membership fee from 4,990 won to 7,890 won, citing increased return costs as a significant factor. The company explained that customers averaged 32 returns per year, and at 5,000 won per return, this equated to an annual cost of 160,000 won per customer, leading to the membership fee hike. To offset these expenses, Coupang will charge sellers additional fees for returns exceeding 20 per month for next-day delivery items sold through its open marketplace platform, starting Jan. 6 next year.
As returns become more common, a secondary market for returned items has emerged. Companies like Coupang, 11Street, and Lotte Home Shopping have launched “return markets” to resell returned items. Homeplus offers discounts on returned and display items at 30 stores nationwide. Naver Pay has also introduced “Return Safe Care,” an insurance service that helps sellers cover return-related expenses.
