E-commerce may make shopping more convenient, but it has a dark side that most consumers never see.
Say you order an electric toothbrush and two shirts during a sale on Amazon. And once you unpack your order, you discover that the electric toothbrush won’t charge and only one shirt fits. So, you decide to return the unwanted shirt and the electric toothbrush.
Returns like this might seem simple and, often, they’re free for the consumer. But managing those returns can get costly for retailers — so much so that many returned items are simply thrown out.
In 2022, returns cost retailers about $816 billion in lost sales, according to the National Retail Federation. That’s nearly as much as the U.S. spent on public schools and almost twice the cost of returns in 2020. The return process, with transportation and packaging, also generated about 24 million metric tons of planet-warming carbon dioxide emissions in 2022.
Together, costs and emissions create a sustainability problem for retailers — and the planet.
Simone Peinkofer, associate professor of supply chain management in Michigan State University’s Broad College of Business, follows developments in retail logistics. Here, she takes a look inside the black box of product returns.
Where do products go after they’ve been returned?
So, you repackaged your unwanted shirt and the electric toothbrush and drove them to UPS, which has an agreement with Amazon for free returns. Now what?
UPS transports those items to the retailer’s warehouses dedicated to processing returns. This step of the process costs the retailer money — 66% of the cost of a $50 item, by one estimate — and emits carbon dioxide as trucks and planes carry items hundreds of miles. The plastic, paper or cardboard from the return package becomes waste.
Processing a return takes two to three times longer than initially shipping the item because it has to be unpacked, inspected, repacked and rerouted. That adds more cost to the company, especially in a tight labor market. Workers have to manually unpack the items, inspect them and, based on the reason for the return, decide what will happen next.
What is the difference between reselling and refurbishing?
If a warehouse worker decides the shirt in our example can be resold, the shirt will be repackaged and sent to another warehouse.
Once another consumer orders the shirt, it will be ready to be packed and shipped.
If the item is defective, like the electric toothbrush, the warehouse worker might send it back to the manufacturer for fixing and refurbishing. It would be repackaged and loaded on a truck (and possibly a plane) to be sent to the manufacturer, leading to more carbon dioxide emissions.
If the electric toothbrush can be repaired, the refurbished product is ready to be sold in the consumer market again, but often at a lower price.
Refurbishing returned products helps to achieve a closed-loop supply chain where products are reused rather than disposed of as waste, making the process more sustainable than buying a new item.
What happens to products that aren’t resold or refurbished?
If the company can’t resell the shirt or refurbish the electric toothbrush economically, the outlook for these items is grim. Some are sold in bulk to discount stores. Often, returned products simply end up in landfills, sometimes overseas.
In 2019, about 5 billion pounds of waste from returns were sent to landfills, according to an estimate by the return technology platform Optoro. By 2022, the estimated waste had nearly doubled to about 9.5 billion pounds.
What are retailers doing to lower the rate of returns?
In the past, customers who wanted to return items by mail were often expected to do so on their own dime. That changed after Amazon began offering free returns and providing easy-to-use drop-off locations at UPS or Kohl’s stores. Other retailers followed suit to compete, with many seeing free returns as a way to keep shoppers coming back.
But that pendulum may be starting to swing back. The percentage of retailers charging to ship returns increased from 33% to 41% in 2022, according to a report from consumer data company Narvar.
Retailers are trying several other techniques to lower the return rate, waste and losses, which ultimately come back to consumers in the form of higher prices.
Some retailers have shortened the return window, imposed limits for consumers who frequently return products, or stopped offering free returns.
Other strategies include creating virtual dressing rooms and clearer fitting guides, which can help reduce clothing returns, as can high-quality photos and videos that reflect size and color accurately. If consumers use these tools and pay attention to sizing, they can help cut down on retail’s growing climate footprint
This article was originally published in The Conversation.
