Retailers and shippers this holiday season will handle more returns than ever of goods bought online.
That’s according to a new report from CBRE, which forecasts that online returns could total as much as $41.6 billion this holiday season. CBRE calculates a maximum value for this season’s returns of online purchases at $41.6 billion by applying the standard percentage range for online returns – 15% to 30% – to this year’s projected holiday retail sales of $138.5 billion. In contrast, the average return rate for merchandise bought in stores is roughly 8%.
For its annual report on online returns, CBRE again teamed with Optoro, a technology company that powers returns optimization for retailers and brands. Optoro estimates that the retail industry’s inefficiencies with handling returned merchandise result in $50 billion of lost profit margin each year and more than 10 billion instances of needless shipments and merchandise touches in warehouses.
“Returned merchandise has a massive impact on retailers’ bottom lines, so the industry is keenly focused on developing new ways to reduce returns and better process those that do come in,” said John Morris, CBRE executive managing director and Americas industrial & logistics leader. “Much of that involves improvements at the point of sale. But a big part of it also entails efficiently processing returned merchandise, sometimes by establishing distribution capacity and procedures strictly for handling returns, and sometimes by outsourcing the process to third-party-logistics companies.”
Among other insights from CBRE and Optoro:
• Various merchandise categories depreciate at different rates when returned to a retailer. For example, fashion apparel can lose 20% to 50% of its value over eight to 16 weeks, according to Optoro. Electronics lose 4% to 8% of their value each month.
• Distribution facilities handling returns – reverse logistics – need 15% to 20% more space than a traditional facility for outbound distribution because the volume, dimensions and final destination of returned goods are inconsistent and varied.
• Options for reassigning returns include restocking the merchandise in the store; selling it to discounters and resellers; donating it to charities; or destroying it. Returns generate 5 billion pounds of waste in U.S. landfills annually, per Optoro.