For Retailers, $42B in Returns Is the Downside of Doing Big Business This Holiday Season

Sheena Butler-Young

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After a rough few years marked by frantic digital disruption, many traditional retailers are finally getting a handle on omnichannel selling. But as total online sales hit an estimated $138.5 billion this holiday season, up by 13.5% from last year, retailers taking a slice of that pie must contend with a hefty returns tab.

A new report by real estate services firm CBRE, in partnership with reverse logistics software provider Optoro, found that approximately $42 billion worth of those online purchases are expected to be returned.

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The ensuing process — dubbed reverse logistics — creates a significant burden for retailers that must find cost-effective and efficient ways to manage the surge of returned products being pushed back into the supply chain.

“The key challenges related to reverse logistics include cost control and product depreciation, along with increased shipments and handling that put a lot of pressure on an already stressed supply chain,” the report noted.

And the problem is multi-faceted: As consumers’ expectations for fast and free shipping mount, retailers face new pressures to meet demands and stay competitive. Optoro estimates that challenges related to shipped returns’ processing times, liquidation recovery and manual processes can result in more than $50 billion in profit loss.

While full-range retailers will tackle holiday returns this year, CBRE’s report noted that e-commerce sales have a much higher return rate than those of brick-and-mortar stores; those are estimated at between 15% and 30%. Overall, according to liquidation platform B-Stock Solutions, between $90 billion to $95 billion in holiday gifts will be returned this year, translating to roughly 11% to 13% of holiday purchases being returned.

UPS, meanwhile, estimates that shoppers will return 1.6 million packages per day the week before Christmas, with returns peaking at 1.9 million on January 2, 2020, up by 26% from last year.

As the holiday season rolls on, early reads have shown solid sales gains during the unofficial kickoff, Thanksgiving weekend. According to Salesforce, global online sales saw a 15% gain to $768 billion during that weekend as retailers pulled out all the stops to accommodate a later Thanksgiving and shortened holiday selling period. Although Cyber Monday is arguably recognized as a bigger day for e-commerce sales than Black Friday, the software firm named Black Friday the biggest digital shopping day for the third year in a row, with online sales on that day surging 24% to $40 billion, compared to Cyber Monday’s growth of 13% to $30 billion. Thanksgiving Day netted an e-commerce sales hike of 24% to $24 billion.

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