How Online Retailers Will Deal With Returned Merchandise This Holiday Season

A new report from CBRE predicts that e-commerce merchandise returns could reach $29B this holiday sales shopping season. The report also outlines methods online retailers could use to handle $14B to $29B in returned goods. 

The importance of retailers’ processes for handling online returns, which are called reverse logistics, has grown along with double-digit growth rates in e-commerce sales, which increased by 17% in 2016 to $95B. The return rate for goods bought online typically ranges from 15% to 30% due to online shopping habits, such as buying multiple versions of a product and deciding later which ones to keep.

“We’ll likely see retailers make progress this year in whittling their online return rates because they have more and better data from past seasons to predict what their customers will buy and keep,” said CBRE managing director of supply chain services Joe Dunlap “Still, big volumes of returns are a fact of life in e-commerce, which leaves retailers with expensive decisions regarding whether to restock, liquidate or destroy returned merchandise.”

Whether retailers can recapture any value from returned goods depends on how quickly and effectively they determine within their reverse logistics processes what to do with returns. Restocking and reselling the returned merchandise recoups the most value, but many goods spoil or fall out of fashion before that can happen, noted the report. As a result, some retailers sell returned goods to liquidators for a lower value, but with greater certainty than restocking for a potential resale. The final option is to send the merchandise to the landfill for a total loss.

The report said online retailers basically have two choices for dealing with growing return volumes: add facilities in their network dedicated to handling returns, which speeds the process and salvages more value from the merchandise, or hire a third-party logistics firm to handle it for them.