Tis’ the season for gift
giving;
and unfortunately for retailers, that means a rush of returns is just around the
corner. Four in 10
consumers
expect to return at least one gift to retailers during the holiday season – in
fact, 31 percent plan
ahead
for this by buying multiple variations of the same item. It’s no surprise return
volumes are projected at $627.3
billion
in 2023 — shedding light on the hidden costs associated with the season of
"giving back."
Returns — encompassing wasted time, packaging and energy — pose significant
challenges for retailers. The average return costs around
$30,
prompting 59
percent
of retailers — including Amazon, Target, Walmart and
Wayfair
— to adopt "returnless" or "keep it" policies for items with return costs
surpassing their actual value. However, the fate of such products still rests
with the customer — with only 34
percent
inclined to donate returnless merchandise, highlighting the barriers to
environmentally responsible disposal.
To address the escalating cycle of excessive ordering and returning, retailers
must adopt innovative strategies. These include leveraging consumer reviews and
technology to assist shoppers in finding accurate sizes, charging for returns to
discourage frivolous behavior and employing smart warehouse automation to
streamline back-end logistics. Efficient inventory and return management are
crucial to offsetting losses and reducing environmental impact.
Rethinking the ‘wrap, return, repeat’ status quo
Most consumers assume that returned items find their way back to store shelves,
but the reality is far from guaranteed. The life and sustainability of a return
varies across retailers due to differences in condition, packaging, tags and
duration away from the store. This intricate process — involving
shipping,
inspection and sanitization — often costs retailers up to 66
percent
of the product price.
Everything you need to know about the state of play in molecular recycling
Join us as Katherine Hofmann, Sustainability Strategic Initiatives Manager at Eastman, explores the potential for this new recycling category to help fuel a circular economy for plastics - Wed, Oct. 16, at SB'24 San Diego.
As a result, many retailers opt to send perfectly usable items to destruction
zones and landfills — contributing to the alarming 5.8 billion pounds of
goods
returned to US retailers that end up in landfills annually. Perhaps more
troubling is the fact that 71
percent
of consumers would alter their shopping habits if they were aware of this
wasteful
reality.
Some 40 percent of stores have begun charging for
returns to dissuade
consumers from sending products back; but this strategy risks alienating
consumers who prioritize customer experience and cost savings amid an
inflationary economic climate.
Addressing the fate of returned
items
— and the larger issue of “wrap, return, repeat” consumer culture — requires
adoption of smart technologies to offset losses and improve retail’s
environmental impact this holiday season and beyond.
Improving efficiency from sleigh to shelf
Successful inventory and return management hinges on knowing exactly what is in
stock and where at any given time, so retailers can ensure all returnable
products make it back on the shelf and online availability accurately reflects
physical inventory. This allows them to sell down to the last item, offer
final-sale discounts on products that are frequently returned, and take
additional steps to mitigate overstock that may take up valuable warehouse
space. Technologies such as radio frequency identification (RFID) help
retailers track and trace items accurately, and enable the seamless return of
products to shelves. RFID also aids in combating fraud — a significant concern
during the holiday season. According to the National Retail Federation, for
every $100 of returned merchandise, retailers lose
$10.30
to fraud; and there’s a 70 percent
increase in fraudulent
returns during the holidays. It often occurs in the form of wardrobing (or
wearing and returning), or when consumers return empty boxes or stolen goods.
Moreover, smart warehouse automation — combining human expertise with robotic
efficiency — reduces restocking charges and alleviates strain on supply chain
workers. Automated systems are also highly scalable and adaptable to changing
demands. As the volume of returns fluctuates during peak seasons such as the
December holidays, automation can be tuned accordingly — ensuring that the
supply chain remains flexible and responsive to market dynamics. The
incorporation of smart warehouse automation in the context of returns and
restocking not only drives efficiency and cost-effectiveness but also fosters a
more balanced and sustainable work environment for supply chain workers. This
collaborative approach paves the way for a future where the challenges of
returns are met with streamlined processes and reduced environmental impact.
Beyond the holiday season
However, even with these advancements, it’s important to consider the fate of
non-returnable items and the broader issue of retail packaging. The unfortunate
reality is that online retail alone is expected to use more than 4.5 billion
pounds
of plastic packaging by 2025. Additional estimates show that even though nearly
90 percent of cardboard boxes are
recycled,
350,000 tons of them still end up in landfills today — and that’s not even
mentioning the countless other packing materials or garments consumers throw
away. The EPA estimates annual landfill methane emissions as equivalent to
driving 20.3 million cars for one
year
— a clear call to action across industries.
Beyond the current holiday season, retailers acknowledge the need for systemic
change. Initiatives such as persistent identification, integrating
machine-readable data into product
fabrics,
and the movement towards QR codes replacing traditional labels showcase the
industry’s commitment to reducing, reusing and recycling. One such initiative is
Sunrise
2027 —
driven by the retail industry with GS1 US. The effort is focused on the
migration from UPCs to 2D barcodes, commonly seen as QR codes on product
packages. These codes allow brands to link to limitless information about an
item
— such as the garment’s fiber composition and recycling instructions, via
product packaging. Retailers will have to be able to scan these codes at POS by
2027 as brands increasingly shift to 2D. This shift aims to enhance
sustainability by facilitating easier and more responsible disposal of products.
There is even a
movement
for these codes to replace traditional clothing labels and tags, which produce
enough label tape to reach the moon and back 12 times each year according to
the
AAFA.
Yet the long-term success of these efforts requires a collective consciousness
among consumers regarding their purchases and a continuous commitment from
brands and retailers to innovate and implement sustainable practices. As the
industry advances towards more circular processes, it is the joint
responsibility of consumers and retailers to navigate the aftermath of holiday
returns with an environmentally conscious approach.
The retail industry is making progress on sustainability every day; but
long-term results will require consumers to be more conscious of what they
purchase and where the items go at the end of their lifecycle — and for brands
and retailers to continue finding new ways to reduce, reuse and recycle.
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SVP of Innovation and Partnerships at GS1-US
Melanie Nuce-Hilton is SVP of Innovation and Partnerships at GS1-US — a not-for-profit, international organization developing and maintaining standards for barcodes.
Published Dec 21, 2023 8am EST / 5am PST / 1pm GMT / 2pm CET