Economy Watch: Retailers Under Pressure to Handle Online Returns Efficiently

Retailers will be in for a challenge to successfully handle the expected $32 billion in online returns this year, according to a recent CBRE report.
Source: CBRE U.S. MarketFlash | 3PL Operators Benefit from Rising E-Commerce Product Returns
Source: CBRE U.S. MarketFlash | 3PL Operators Benefit from Rising E-Commerce Product Returns

As e-commerce represents an increasing portion of holiday retail sales, retailer efficiency in handling returns of merchandise bought online—which could amount to as much as $32 billion this year—will make or break the holiday season for many, according to a recent report by CBRE.

E-commerce consistently generates more returns than brick-and- mortar retail, partly because shoppers often can’t sample online merchandise before buying it. Also, there’s the widespread practice of online shoppers ordering several versions of a product and returning those that don’t appeal, the report noted.

Returns of store-bought merchandise have, historically, amounted to about 8 percent of total retail sales. However, for e-commerce, that share ranges from 15 percent to 30 percent, depending on the product category.

If those percentages hold true, the value of returns this season will increase by the same 13.8 percent that Adobe Analytics predicts for the increase in online sales this season. Adobe further foresees online sales this season reaching $107.4 billion, up from about $93 billion last year. CBRE thus calculates that the projected ceiling for returns is $32 billion, up from roughly $28 billion last year.

Those well positioned to thrive in the online-returns market (also called reverse logistics) include third-party logistics firms and owners of 3PL facilities, according to CBRE. Many retailers opt to contain costs and preserve their retail focus by outsourcing reverse-logistics functions to 3PL firms that specialize in the field.