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Wednesday, May 25, 2022

Adam Minter: Holiday gift returns are choking retailers and landfills

As the heat of the holiday season wanes, Americans look coldly at their Christmas gifts. A lot of people don’t like what they see.

One in four Americans expect to return at least one holiday gift by next weekend, according to a UPS report. That’s at least 60 million packages in a single season of returns for the world’s largest shipper alone, and 10% more than during the 2020 holidays. As the cost of shipping and handling these returns increases, retailers and consumers are facing expensive and unsustainable purchases in the future.

For generations, savvy retailers have adopted a lenient return policy to demonstrate reliability and retain customers. They knew full well that unscrupulous customers could use the refund policy without question or without receiving a receipt. But the success of retailers like Nordstrom Inc. and Target Corp., both of which are renowned for liberal return policies and loyal customers, have highlighted offsetting benefits. In a recent survey of clothing companies, 86% of respondents agreed that returns are a “necessary evil.”

Online retailers recognized the need early, adopting a soft return policy and free return shipping to gain the trust and loyalty of consumers new to e-commerce. Perhaps the most aggressive supporter was Zappos, an online shoe retailer now owned by Amazon.com Inc. Early on, the company encouraged customers to order shoes in different sizes and then return the ones that didn’t fit, and paid for shipping. Back in 2010, Zappos was happy to tell reporters that its best customers are the ones who return the most items.

This is an expensive way to gain market share. In 2020, US consumers returned approximately $428.6 billion worth of goods, or 10.6% of total retail sales. Now, online retailers hit by picky COVID-era consumers are facing 15% to 30% returns.

Returns are just the start of the seller’s costs. According to a recent analysis by returns companies, it will cost retailers $33 to process a $50 return item in 2021, up 59% from the previous year.

Several well-known factors are driving this rise in costs in the age of COVID-19, especially for e-commerce retailers. Rising transport costs have made it more expensive to move returned goods to specialized processing centers and then to their final destinations. Rising labor costs are forcing retailers in need of employees to open, evaluate and route returned merchandise.

But the biggest costs are by far the write-offs and liquidation of returns ($6.50 to $35.25 on average for a $50 product). Few returned items are redirected back to the retailer’s inventory. The flow of returns is so high (and growing) that retailers simply can’t assess whether every single pair of jeans, porch furniture set, or Lego set is in resalable condition.

To manage volume, retailers rely on an intricate network of brokers, resellers, liquidators, and sometimes themselves to capitalize on revenue. For example, Home Depot Inc. runs online liquidation auctions for returned items with lot descriptions such as “Truck (18 pallets) of outdoor power equipment, toiletries and more.” The winners sort and hopefully resell the products. But there is no guarantee that everything will work (it’s a return, after all), so the reseller takes on the burden of disposal.

This can be a heavy burden. In 2020, retail returns generated almost 6 billion pounds of waste. Part of it is the packaging. But most of this returned product cannot be resold. In such cases, resellers and retailers, faced with an unmanageable flood of returns, have been known to incinerate returned goods or dispose of them in landfills. Retailers that don’t fix the problem are not only liable for waste, but also risk alienating customers.

The financial burden is just as serious. Last month, British online fashion retailer boohoo Group PLC lowered its sales forecast, in part due to a ruinous 12.5% ​​revenue growth compared to December 2020.

They are not alone. In recent years, respected retailers including Nordstrom have tightened up on their once liberal return policy in response to rising prices. So-called “free” returns are being dwindled and consumers are being encouraged to deliver unwanted items to brick-and-mortar stores.

Solutions to avoid alienating consumers accustomed to free returns are still few. For example, many online clothing retailers have invested in virtual fitting rooms to help online shoppers purchase the right clothing. So far, fitting rooms don’t seem to have had much of an impact on profitability.

A better approach might be a retail campaign that describes the environmental and financial costs associated with returning an item. At a time when consumers and retailers are looking to boost their reputation for sustainability, honestly recognizing what happens when consumers buy more than they need (or want) can benefit everyone.

World Nation News Deskhttps://www.worldnationnews.com
World Nation News is a digital news portal website. Which provides important and latest breaking news updates to our audience in an effective and efficient ways, like world’s top stories, entertainment, sports, technology and much more news.
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