The gifting is done. Some were successful, others less so – the wrong color, size, redundant, too impulsive, not suitable for re-gifting. US consumers return about 20% of all online purchases and the post-holiday period is when the massive, but often unseen, returns logistics industry – the reverse supply chain – goes into overdrive.
According to the National Retail Federation, US consumers returned more than $816bn worth of retail merchandise in 2022, up 7% from a record $761bn a year earlier, and more than the US defense budget.
On top of that, issues including “bracketing”, when shoppers buy multiple sizes of the same item and only keep one, or “wardrobing”, where shoppers buy things to wear once and then return, shoplifted or stolen merchandise, or organized retail crime – cost retailers $10.40 for every $100 in returned merchandise accepted.
Avoiding “return anxiety” has become key to consumers’ purchasing decisions since the early 2000s when footwear retailer Zappos and Amazon introduced free-return policies. As e-commerce has increased and delivery times have accelerated, so have returns and there appears to be little retailers can do about the staggering rates.
“Amazon did it to delight their customers and it’s now a policy among other retailers who had to do it to keep up with Amazon’s growth,” says Christian Piller, a guest lecturer on retailing at DePaul University in Chicago who runs Atlanta-based Pollen Technologies, a software company looking to smooth the reverse supply chains.
“I don’t know that any retailers have taken a hard look at their return policies, return processes or the inconveniences that the current process presents to consumers,” Piller adds. “Creating barriers to returns hurts sales, but the processes and systems we see in the return space haven’t been innovated in years.”
The waste and environmental cost of returns is a huge and growing issue. The millions of items returned to retailers rarely make it back on to the shelves, in part because inventory and point-of-sale systems don’t allow for it and partly because wardrobing and bracketing accounts for as much as half the number of items returned.
US returns generate 16m metric tons of carbon emissions during their reverse journey and up to 9.5bn pounds of landfill waste each year, as much as 10,000 fully loaded Boeing 747s, according to the returns solution provider Optoro.
“The vast majority of returns never make it back to the shelves – they end up at a liquidation sale, where you can buy a truckload of TVs for $2,000,” says Piller, “or they go to a landfill, where 40% of returns end up.”
Sorting out what is salvageable and what is waste is the province of the retail returns industry, estimated at $627bn in 2023. Retailers don’t typically like to discuss their relationship with the returns industry, an understandable position since it undermines brand image and sustainability pitches to consumers. But the returns industry is a significant employer, requiring labor to collect, ship, test, sort and grade items – including sniff and stain tests for clothing, repackaging and additional shipping to a landfill or reseller.
Inmar, the largest returns liquidator in the US, processes half a billion returned goods each year across 17 warehouse facilities.
Piller says that retailers, online and bricks-and-mortar, must do a better job of incorporating returns into their holiday planning processes by improving their returns processes and systems to change the culture of returns. This could be done by reducing the return rate by including more customer feedback on the product, and the rate that it is returned.
Improving the ease of returns, including a service to pick the items up to help reduce the time the retailer waits, can help to reduce the amount that goes to landfills because the item is now out of season. Speedier returns, coupled with speedier validation, grading and refund processing, could accrue goodwill to the retailer and help get consumers back on the hunt for more stuff.
Much of this points to improving returns systems – and improving consumer return profiles to the level of sophistication that has gone into purchasing – who buys what and when, where your eyes are and where the mouse is, what’s in your cart, the one-click buy and so on.
“They’ve made it very easy to help you part with your money but what doesn’t exist is the same thing for returns,” says Piller. “We need data analytics for why customers return, when do they return and if offered incentives, would they exchange instead of return?”
Piller points out that having better information about returns can also improve retailing and manufacturing. For example, a quarter of golf clothes get returned because the customer doesn’t like the color. “Maybe that tells you something. Maybe you need to have better pictures on your website? Maybe you need to change the name of the colors? Maybe they fade fast? All are insights that can help retailers reduce the return rate in the first place,” Piller points out.
But retailers have learned that deterrents for returns act as deterrents for purchasing. Piller points to the choice of buying a Nike shoe from Nike the brand or Macy’s the store. “If Macy’s offers a better return policy, consumers are going to go with Macy’s,” he says. “Retailers that started to charge for returns saw a decline in sales.”
In the gladiatorial sport of consumerism, accounting for two-thirds of US economic activity, the stakes could hardly be higher: “A retailer wants a consumer to buy something and keep it – and make it easier for them to continue to do business with me so I get to retain those dollars.”
