Retailers love the holiday season. All those returned gifts that start rolling back to them after the holidays are over? That they don’t like.
It’s why these retailers need a strong reverse-logistics network, and will often third-party logistics providers to more efficiently handle these returns.
Problem is, as e-commerce sales increase, retailers will have to work harder to limit returns. As CBRE says in a recent report, successfully limiting returns will make or break this holiday season for many retailers.
CBRE says that e-commerce sales could hit $107.4 billion this holiday season, an incredible figure and up from about $93 billion last season. Unfortunately, e-commerce sales consistently generate more returns than do brick-and-mortar retail sales. That’s because shoppers usually can’t sample online merchandise before buying it. Online shoppers also order serveral versions of a product and returning those that they don’t like.
CBRE reports that historically returns of store-bought merchandise have amounted to 8 percent of total reail sales. For e-commerce sales, though, that share ranges from 15 percent to 30 percent, depending on product category.
This, then, creates challenges for retailers who don’t want the losses that come with returns. CBRE etimates that returns from online sales could cost retailers as much as $32 billion this holiday season, up from about $28 billion last year.
Retailers must have a system in place to process these returns as efficiently as possible. It’s the only way for them to minimize their losses from returns.
“Speed and efficiency in processing e-commerce returns, with an eye toward preserving as much value of the merchandise as possible, often separates the top-performing retailers from the not-so-successful ones in the weeks after Christmas,” said David Egan, CBRE head of industrial and logistics research. “This intricate process requires many components, including a precise network of warehouses for handling returns, robust inventory management systems and extensive customer analysis on the front end to limit the probability of returns.”
Those well-positioned to succeed in the online-returns market – also known as reverse logistics – include third-party logistics firms and the owners of 3PL facilities, according to CBRE. Many retailers outsource reverse-logistics functions to 3PL firms that specialize in this field as a way to contain costs. Outsourcing this work also allows retailers to focus not on reverse logistics but on what they do best, retail sales.