• Business Insider

Brick-and-mortars prepare for influx of holiday returns

This year's holiday season brought an influx of online shopping, with total e-commerce sales reaching nearly $80 billion from November 1 through December 21, according to Adobe Digital Insights.

This poses retailers and logistics providers with a significant dilemma as shoppers return unwanted gifts and holiday purchases, which can result in steep return logistics expenses. For brick-and-mortar retailers, however, there may be an opportunity to cross-sell other items when customers come into the store to make returns.

The busy holiday season does not end after the new year for retailers as they must prepare to handle returns:

  • Shoppers in the US return up to 10% of all holiday purchases, including both online and offline purchases, reports the National Retail Federation.

  • Meanwhile, on average, about 30% of all e-commerce orders are returned, according toThe Wall Street Journal.

Reverse logistics is a headache for online merchants and fulfillment providers, particularly after the holidays. Reverse logistics is a multi-billion dollar problem that cuts into retailers' profits by as much as 10-20% — US consumers returned $260.5 billion worth of merchandise in 2015, representing 8% of total retail sales.

Given the high volume of online orders that were placed over the holiday season, the first few weeks of the new year could bring significant pain points for logistics providers, like UPS and FedEx. Moreover, consumer standards are rising when it comes to online returns — they often expect it to be free and for retailers to provide a return shipping label in the original package.

Brick-and-mortars hold a significant advantage when a customer wants to return an online purchase. If a traditional retailer doesn't offer free return shipping, they can allow consumers to go to a physical location to return the item. This can leave shoppers more satisfied by the return experience and help increase foot traffic in physical stores that may typically have trouble getting shoppers through the door. For example, over 90% of JCPenney's online returns are made in a physical store, notes the WSJ article.

Additionally, these legacy retailers have an opportunity to cross-sell items that are stocked in-store — about half of shoppers making an in-store return for an online order make an additional purchase. Given that the cost of reverse logistics will likely only continue to increase as the total e-commerce market grows, retailers with a brick-and-mortar presence should ensure they offer in-store returns to smooth the process and keep costs down.

When products are returned to a merchant, the merchant faces the costly process of either repurposing, reconditioning, or recycling the good. This multi-billion dollar problem is referred to as reverse logistics and it can cut into retailers profits by 10% to 20% every year.

This problem will be even more exacerbated by the rise of e-commerce, as customers increasingly ship back goods to the retailer, who often might pay for the shipping costs.

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