Online Returns Set To Break Records, Fracturing Supply Chains

An earlier start to online returns—coupled with record-breaking volume of such transactions—will continue to stress already-fractured supply chains this holiday season, according to a new report from CBRE and retail services firm Optoro.

E-commerce returns could hit more than $66 billion this year, a 46% increase over the five-year average. CBRE and Optoro formulated the predictions using National Retail Federation data which estimated that online holiday purchases during the months of November and December will reach $222.3 billion.

Optoro data also indicates that 41% of consumers, spooked by product availability issues and well-documented supply chain delays, will shop earlier this year, elongating the return season. The cost to process returns is also increasing, with high-value electronics like laptops, tablets and cell phones posting the highest reverse logistics costs in terms of total dollar cost per unit, according to Optoro.

Returns also require up to 20% more space and labor than order fulfillment, and facilities for such functions are typically second-generation with lower ceiling heights. Industrial markets with large supplies of this type of warehouse space include Columbus, Central New Jersey, the Pennsylvania I-78/81 Corridor, Memphis, Nashville and Inland Empire, which have a combined 84.6 million square feet of industrial space under construction.

“E-commerce holiday gift returns have always been a significant challenge for retailers, but this year will be particularly difficult,” said John Morris, executive managing director and Industrial & Logistics Leader. “With the growth of e-commerce during the pandemic and the increasing costs across a bruised supply chain, reverse logistics will be tougher and more costly than ever before for retailers this holiday season.”

The CBRE report notes that providing customers with the option to return online purchases to stores can lower call center, transportation, processing and discount costs.

“Maximizing opportunities to resell returned items is key to avoiding losses on liquidated returns,” the report states. “Ultimately, investing in technology to help retailers more efficiently process returns can reduce value erosion and waste. By automating the returns process, retailers can shorten the time it takes to receive and route returns back into stock or to a resale channel. Quickly moving returns back into inventory allows retailers to preserve seasonality.”