CBRE Forecasts Online Returns Could Total As Much As $37 Billion This Holiday Season

The voracious growth of e-commerce brings with it a costly byproduct—online returns—that CBRE calculates in a new report could total as much as $37 billion for this holiday season

Online returns often draw additional attention in December due to the large volume of e-commerce during the holiday season. But the challenge of processing and reselling those returns—often called reverse logistics—is a year-round conundrum for retailers and shippers.

Whereas the traditional return rate for goods purchased in stores is roughly 8 percent, the rate for online purchases ranges from 15 percent to 30 percent, depending on the merchandise category. CBRE applied that range to eMarketer’s projection of $123 billion of online sales in this year’s November-December period to arrive at this season’s maximum value of online returns: $37 billion. That’s markedly more than CBRE’s forecast from last holiday season of $32 billion in online returns.

“The speed and efficiency with which a company can process and resell or dispose of online returns can be the difference between making money or losing it on their holiday e-commerce sales,” said David Egan, CBRE Global Head of Industrial & Logistics Research. “The most effective retailers and shippers have built their supply chain to handle a reverse flow of merchandise, or they have hired the right partners to handle that for them.”

For its latest annual report on reverse logistics, CBRE teamed with Optoro, a technology company that powers returns optimization for retailers and brands, to generate additional insights on the cost of online returns and value of potential solutions. Among those insights:

• Consumer electronics, once they are returned to a retailer, can lose 4 percent to 8 percent of their value for each month they’re not resold, according to Optoro. That illustrates why a critical factor in retailers’ efforts to limit their losses on returns is how quickly and efficiently they can process them and put them back on the market.
• Other categories can lose value even more quickly. For example, fashion apparel can lose 40 percent to 50 percent of its value over an eight- to 16-week span after being returned, according to Optoro.
• Companies that opt to handle online returns within their own supply chain often need to add warehouse space to do so, because processing returns is labor- and space-intensive. Optoro calculates that reverse logistics can require, on average, 15 percent to 20 percent more square footage than the typical outbound supply chain.
• Another option—hiring a third-party-logistics firm, or 3PL, to handle returns—is a popular choice. CBRE found that 3PLs accounted for more than half of the 50 largest U.S. warehouse leases in the first half of 2018. Nationally, 3PLs have expanded their real estate footprint by a healthy 3 percent to 5 percent annually.

“With ecommerce sales and returns, on the rise, retailers and brands need systems in place to route inventory quickly and efficiently,” said Joe Hsu, Senior Director of Solutions at Optoro. “Using a returns optimization platform can help retailers, recoup costs, get inventory back to stock and available for sale faster, and improve the customer experience through faster refunds.”

To read the full report, click here.