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Holiday Gift Returns Expected to Stress Supply Chain

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More stress for retailers and the already strained supply chain may be ahead as e-commerce returns are expected to sustain high volumes following the holiday season, according to a new report from CBRE in partnership with Optoro, a provider of returns technology and services for processing retail returns.

According to the report, e-commerce returns could total as much as $66.7B, a 45.6 percent increase over the five-year average. The forecast is based on National Retail Federation data, which estimates online holiday purchases (November and December sales) to total $222.3B.

And the cost to process all the returns is going up: A $50 item could amount to 66 percent of its sale price on average—up from 59 percent last year—when factoring in the costs of customer care, transportation, processing, discount loss and liquidation. High-value electronics, such as laptops, tablets and cell phones, will see the highest reverse logistics costs in terms of total dollar cost per unit, according to Optoro.

“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, CBRE. “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.”

Additionally, returns (reverse logistics) require up to 20 percent more space and labor capacity than the original order fulfillment process (forward logistics). This creates additional challenges given that industrial space is already historically tight, with third-quarter U.S. vacancy rates at a record low of 3.6 percent, according to CBRE.

 

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