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Are return rates out of control?

Written by Tom Ryan

Photo: Getty Images/Juanmonino

UPS expects a whopping 26 percent year-over-year surge in the number of returns it processes on January 2, National Returns Day. Those levels would represent the seventh consecutive record number of returns. The surging rate of returns is occurring largely due to strong online growth. Estimates for returns of online purchases range from 15 to over 30 percent, with items such as apparel and footwear at the high end of that range. The return rate for physical stores ranges from three to 10 percent. UPS touted solutions it provides to manage the return process, including numerous drop-off points and pre-paid labels for consumers. For retailers, UPS offers visibility to anticipate impacts to inventory and the ability to route returns for repair, repackaging or restocking. Several recent articles detailed the complications involved in mastering reverse logistics or transporting items from buyers back to sellers. These include the fact that:
  • Most returned items need to be handled individually.
  • Distribution facilities handling returns need 15 percent to 20 percent more space than a traditional facility for outbound distribution because the volume, dimensions and final destination of returned goods are inconsistent and varied, according to Optoro.
  • Various categories depreciate at different rates when returned to a retailer. For example, fashion apparel can lose 20 percent to 50 percent of its value over eight to 16 weeks, per Optoro.
  • Quick assessments need to be made on whether the returned item should be restocked in the store, sold to discounters and resellers, donated to charities or destroyed. Returns generate five billion pounds of waste in U.S. landfills annually.
Some retailers are seeking to offset the cost of online returns by choosing not to provide prepaid mailing labels, requiring a receipt unless an unwanted item is carried to a store and threatening to ban serial returners. The trend overall, however, has been toward less strict return policies that engender goodwill. “The problem is that in this kind of competitive environment they have to make life easy,” Neil Saunders, retail managing director at GlobalData and a RetailWire Braintrust panelist, told the Financial Times. “The consumer is almost being trained to be wasteful.”

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