‘Tis the Season of ‘Giving Back:’ The Environmental Impact of Holiday Returns

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.

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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Melanie Nuce-Hilton

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.

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Tags:

Consumer Insights

Retail

Circular Economy

Systems Shift

Finance/Insurance/Investment

Living Within Our Means

Responsible Consumption

Published Dec 21, 2023 8am EST / 5am PST / 1pm GMT / 2pm CET