While e-commerce companies are likely to see a record level of online purchases this holiday season, they’re also experiencing a costly problem – returns – which could total as much as $82.1 billion in the U.S., according to a new report from CBRE.
“Reverse logistics have a huge impact on retailers’ bottom lines, and the most effective retailers have built their supply chains to effectively handle the reverse flow of merchandise,” says Joe Dunlap, managing director, Supply Chain Advisory at CBRE. “Smart return policies, enlisting help in third party merchandise handlers and making the returns process easy for customers all help retailers increase their rate of recovery on returns.”
- E-commerce sales are predicted to increase by 7% this holiday season to $273.7 billion, according to the National Retail Federation. CBRE calculates a maximum value for this season’s returns of online purchases at $82.1 billion by applying the standard percentage range for online returns – 15% to 30% – to this year’s projected holiday retail sales.
- CBRE partnered with Optoro, who estimates that the cost of returns in the U.S. has increased by 50% or $149 billion since 2018. The cost to return a purchase averages 27% of the purchase price, potentially erasing as much as 50% of the sales margin.
- Many e-commerce companies have long waived shipping costs on returned merchandise, which consumers now widely expect. A recent consumer survey by Optoro found that 64% of respondents said they would favor retailers that offered the best return policies, while 44% said that free shipping of returns was of particularly high importance.
- Optoro found that 87% of retailers revised their return strategy in 2023 to include additional drop-off locations, charging for returns, allowing customers to keep certain returns, policing fraud and providing an online returns portal. Of those surveyed, 44% increased their return and restocking fees, a growing trend that is off-putting to the consumer.
- Many retailers are enlisting 3PLs to keep the right inventory in the right locations to meet demand, so much so that 3PLs are the largest industrial occupier with 31% of leased space in 2023, according to CBRE.