GlobeSt.com: What are retailers doing—if anything—to actually reduce the number of returns from e-commerce?

Strasmann: It's a really big issue, and it's going to get bigger. The goal of these guys is the returns as a factor of doing business: if you can get the customer back to the store to return it, they'll spend 110% more, which is a better situation. It's easier to send it back because at this point in time, most retailers are paying for shipping back. The entity jetpack.com recently instituted a two-price distribution arm for Walmart based on either a no-return or return policy. The no-return policy less expensive than the return policy. Those are two examples of possible ways to ease some of the financial drain on these companies.GlobeSt.com: What are retailers doing—if anything—to actually reduce the number of returns from e-commerce?

And it's a big financial drain. There are four tons of boxes in returns at $16 billion that end up at the dump. Distribution centers are not set up for these returns. It sits in the distribution center and takes up space, and the retailers have to figure out what to do with it. They're trying to evolve to getting analytics on the data as soon as possible.

With regard to real estate, it's both good and bad. It's good for industrial properties, bad for retail. It will be a continuing trend until someone solves it. E-commerce is growing and at the very beginning stages. Returns average between 15% and 30%, and most returns are apparel. They either need an increase in size range or they need to open up different facilities to handle returns. In Southern California, reverse logistics will exacerbate the already-tight industrial-vacancy situation, although it's a bonus to the industrial market, and it will continue to spur activity in our market. The solution is not upon us right now, but whoever figures it out will be a big winner.

GlobeSt.com: Can anything be done to alleviate this problem from the supply side?

Strasmann: It will be interesting to see if the return vs. non-return pricing model works, but it only works in certain product types like shoes and apparel. Until they start charging people for sending materials back—and right now it's so competitive that everyone is extending their market share so they haven't done that yet. But it may come into play when this industry evolves. Retail will get better at this.

GlobeSt.com: How do retailers view returns from e-commerce?

Strasmann: E-commerce is growing at a 15% to 17% clip, and we're not anticipating anything different in the next couple of years. Returns will increase, and costs will be a continuous financial drain on these companies. Analytics ASAP are critical so they know what to do with the product and what's coming back.

GlobeSt.com: What else should our readers know about this topic?

Strasmann: Enjoy the free return policy while it lasts. I don't think the industry has evolved quite yet where they say they can't afford to do this anymore. No one wants to stop that. We're at the very beginning stages of e-commerce still. We will eventually figure it out. Cost does matter, and they will fault for that or prices will increase.

NEWPORT BEACH, CA—As retailers grapple with the cost of e-commerce returns and toy with the idea of having customers pay a premium for it, the industrial sector may reap the benefits, CBRE's senior managing director Kurt Strasmann tells GlobeSt.com. E-commerce returns, known in the industry as reverse logistics, is defined as “the movement and management of products and resources after sale and delivery to the customer, including product returns for repair and/or credit, according to the Council of Supply Chain Management Professionals.

Historically, retail returns comprise 8% of total sales. However, e-commerce return rates are much higher at 15% to 30%, depending on the product type, according to CBRE. eMarketer recently reported that online sales were projected to rise 17% in the 2016 holiday season to $95 billion, which had the potential to result in up to $29 billion worth of returns. Returns add significant costs to retailers and distribution networks that are not optimally equipped for the reverse flow of inventory. It is estimated that returns, either sold at discount or disposed of, cost retailers 4.4% of total revenue each year.

The solution to the reverse-logistics problem can be found in improved and expanded supply-chain networks, creating tremendous industrial real estate opportunities as users look to add additional warehouses and distribution centers to support the reverse flow of inventory, says CBRE. Third-party logistics operators and owners of 3PL facilities are poised to benefit, as many retailers seek to outsource their reverse logistics operations to cut costs and gain maximum efficiencies.

We spoke with Strasmann about what retailers are doing to decrease reverse logistics and how it could be approached from the supply side.

GlobeSt.com: What are retailers doing—if anything—to actually reduce the number of returns from e-commerce?

Strasmann: It's a really big issue, and it's going to get bigger. The goal of these guys is the returns as a factor of doing business: if you can get the customer back to the store to return it, they'll spend 110% more, which is a better situation. It's easier to send it back because at this point in time, most retailers are paying for shipping back. The entity jetpack.com recently instituted a two-price distribution arm for Walmart based on either a no-return or return policy. The no-return policy less expensive than the return policy. Those are two examples of possible ways to ease some of the financial drain on these companies.GlobeSt.com: What are retailers doing—if anything—to actually reduce the number of returns from e-commerce?

And it's a big financial drain. There are four tons of boxes in returns at $16 billion that end up at the dump. Distribution centers are not set up for these returns. It sits in the distribution center and takes up space, and the retailers have to figure out what to do with it. They're trying to evolve to getting analytics on the data as soon as possible.

With regard to real estate, it's both good and bad. It's good for industrial properties, bad for retail. It will be a continuing trend until someone solves it. E-commerce is growing and at the very beginning stages. Returns average between 15% and 30%, and most returns are apparel. They either need an increase in size range or they need to open up different facilities to handle returns. In Southern California, reverse logistics will exacerbate the already-tight industrial-vacancy situation, although it's a bonus to the industrial market, and it will continue to spur activity in our market. The solution is not upon us right now, but whoever figures it out will be a big winner.

GlobeSt.com: Can anything be done to alleviate this problem from the supply side?

Strasmann: It will be interesting to see if the return vs. non-return pricing model works, but it only works in certain product types like shoes and apparel. Until they start charging people for sending materials back—and right now it's so competitive that everyone is extending their market share so they haven't done that yet. But it may come into play when this industry evolves. Retail will get better at this.

GlobeSt.com: How do retailers view returns from e-commerce?

Strasmann: E-commerce is growing at a 15% to 17% clip, and we're not anticipating anything different in the next couple of years. Returns will increase, and costs will be a continuous financial drain on these companies. Analytics ASAP are critical so they know what to do with the product and what's coming back.

GlobeSt.com: What else should our readers know about this topic?

Strasmann: Enjoy the free return policy while it lasts. I don't think the industry has evolved quite yet where they say they can't afford to do this anymore. No one wants to stop that. We're at the very beginning stages of e-commerce still. We will eventually figure it out. Cost does matter, and they will fault for that or prices will increase.