Billions of Dollars in Online Returns Is the Problem Retailers Don’t Need — But Must Contend With — In a Holiday Season Like No Other

Sheena Butler-Young
·3 min read

In a year that has been defined by an apparent unending stream of bad news, perhaps it’s no surprise that traditional retailers that have rushed to shift their resources to digital in hopes of saving their pandemic-plagued businesses face another hurdle: The massive burden that comes with online returns.

Would it be 2020 if one issue doesn’t have another lurking right behind it?

“If retailers think they’re stressed getting orders to consumers this holiday season, they’re going to be even more stressed handling all the returns coming back their way,” said Keith Turco, president and managing director for the Americas at digitization software provider Evrythng.

According to the National Retail Federation, online sales this holiday season could increase as much as 30% to $218.4 billion, up from 2019’s $168.7 billion. Although it won’t compensate for all losses in the brick-and-mortar channel, those gains could help some retailers — particularly those that have revamped their supply chains to perform in an omnichannel-driven environment — stay afloat as they navigate through the uncertainty of looming lockdowns and renewed restrictions on nonessential businesses. (NRF online sales data includes other “non-store” sales.)

The bad news? Data from Salesforce projects that consumers this holiday season are expected to send back $280 billion worth of global ecommerce orders — or 30% of all purchases made during the period. In the United States alone, $55 billion worth of online returns could clog distribution networks during the November and December period, according to B-Stock, a B2B online auction platform for returned, overstock and liquidation merchandise.

Marcus Shen, COO of B-Stock said the company has already seen a higher volume of customer-returned merchandise entering its networks during this holiday season compared with last year — and it’s a trend that’s prevalent in the dotcom channel. But, that’s not to say retailers have to be hamstrung by an abundance of returns.

“Each category is a little bit different but for apparel and footwear, the technology that’s out there to allow people to try things on before they buy, [such as] virtual showrooms, are going to see more and more adoption,” noted Shen. “The other thing is going to be [offering] personalization to consumers [which helps retailers gather] intelligence. The more [insight] that a retailer has about consumers’ preferences, their favorite brands and other tendencies, the more those things can be factored into [product offerings].”

And when it comes to the backend challenges related to processing the actual returns, Shen said it’s critical that retailers employ the same vigor — including research and investment — in managing returns as they do in pushing product out the door. (Data from returns solutions provider Optoro indicates that 97% of consumers will buy from a retailer again after having a positive returns experience.)

Indeed, a report this week from CBRE Industrial & Logistics highlighted the “enormous stress” e-commerce returns can cause on distribution networks, adding that for the average return, reverse logistics costs amount to 59% of the original sales price of the item. (CBRE puts the total holiday season online returns tally at $70.5 billion this year, even higher than B-Stock’s estimate.)

The trend, noted Matthew Walaszek, director of research at CBRE, has meant many retailers are partnering with third-party logistics firms to help manage the load as well boost customer retention with a frictionless returns process.

“Although [large volumes of holiday returns] happen every year, this has become especially relevant this time around: First, because there is a stay-at-home environment and consumers are purchasing more items online to support this reality,” said Walaszek during a press briefing Monday. “Physical gifts will be a lot more common this year than things like concert tickets or other experiential gifts. And it has become clear that COVID-19 has shifted consumer shopping patterns and forced adoption of e-commerce across all generations.”

He added, “Retailers are competing for return customers so a seamless returns process does matter.”

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