Retailers may brace for wave of returns

Americans are in the final sprint of a record year of e-commerce spending, filling their digital carts with holiday gifts and decor in a year when public health concerns are keeping them away from stores. That
online haul, though, foreshadows an unfortunate
aftershock for retailers: A potentially unprecedented deluge of merchandise
returns.
Online purchases have long had higher rates of returns than those for goods bought in stores, for obvious reasons: When you don’t try on or test a product before buying, you’re more likely to make a regrettable purchase.
With e-commerce spending expected to grow 35.8% in the US this holiday season, the safe bet is that
returns will surge, too. Optoro, a so-called reverse logistics company that helps retailers manage returns, estimates $115 billion of merchandise will be returned between Thanksgiving and the end of January, compared with an estimate of $100 billion last year.
This creates fresh challenges for stores whose supply chains and in-stock positions have been strained for the better part of a year by greater demand in their e-commerce channels. The ones that adapted to higher return volumes early in the pandemic and have worked to make the experience more seamless for shoppers are better positioned to weather the onslaught.
Even before the pandemic, managing returns was a feat of logistical acrobatics, given that some items can be put back on shelves, some must be refurbished, and others go to landfills. Now, though,
the choreography has new twists.
Consumers are returning bigger items such as furniture and appliances. Sender Shamiss, the chief executive officer of reverse logistics provider goTRG, said the size of items returned is up more than 200% since the pandemic began. That’s just one cause of a space crunch: Tobin Moore, CEO of Optoro, said his company has been working to help retailers find temporary space to house and process returns because they have had to reconfigure areas normally used for this purpose to fulfill outgoing online orders.
Meanwhile, when e-commerce becomes a larger share of a retailer’s business, there’s a chance that more inventory that could otherwise be sold is being trapped temporarily in the returns process. This is especially true with clothing, a category where shoppers frequently engage in a practice known as “bracketing,” or ordering multiple sizes and colours with the intention of keeping only one. Each day a returned Christmas sweater sits in a truck or warehouse before being restocked, the chance of a retailer selling it at full price dwindles.
Finally, before the pandemic, shoppers often preferred making e-commerce returns at brick-and-mortar stores, which are open at convenient hours and offer instant refunds.
But now that they are consolidating store visits to avoid potential exposure to the coronavirus, some are most likely taking different paths, including mailing
returns or bringing them
to a neighbourhood pickup point.
—Bloomberg