Retailers should get ready for record online returns
Surging e-commerce sales will drive more returns of goods bought online this holiday season than ever.
Returns this season could total as much as $70.5 billion, a whopping 73% increase from the previous five-year average, according to a report from CBRE. The company attributed the increase to a historic rise in e-commerce sales triggered by the pandemic.
CBRE’s forecast, based on National Retail Federation data, estimates online purchases this holiday season will increase 40% to reach $234.9 billion. With an average return rate of 30% for online purchases, it’s easy to see why CBRE forecasts that the overall number of returns will jump significantly.
"Online returns continue to be a challenge and this year reverse logistics operations could be stressed like never before,” said John Morris, industrial & logistics and retail leader for CBRE. “With fewer in-store sales this holiday season, retailers will have to shift much of their focus to returns processing and their distribution networks in order to recoup as much value as possible.”
CBRE that says retailers will rely on third-party logistics companies to handle complex reverse logistics.
“So many items travel backwards, and that’s expensive, yet retailers have not made a lot of effort to become proficient in reverse logistics,” said John Morris, executive managing director of industrial and logistics at CBRE. “What they’re doing is hiring the third-party logistics companies. They have all of what’s missing--scale, transportation services, and space.”
Costs accrued from the customer care, transportation, and liquidation loss of a $50 returned item can add up to $29.50, according to Optoro, a provider of returns technology and services for processing retail returns and CBRE’s partner in the report. In a poll, Optoro found that 42% of shoppers said they stopped shopping with retailers that handed them negative return experiences.
Industrial properties have vacancy rates of under 4%, the lowest level in the real estate industry. CBRE expects 1.5 billion sq. ft. of warehouse space to be delivered in the next four years, but only 400 million sq. ft. of that is expected to be ready next year, and all of it is already leased—mostly by 3PLs.
“More than 500 million square feet of industrial space was leased this year, maybe the highest annual total ever,” Morris said.
Also, not all returns can be successfully discounted and put back in rotation. Optoro estimates that returns produce 5 billion pounds of waste in landfills annually.