Return to sender: gift returns overwhelm senders
Last week, customers at the UPS Store in Seattle’s Interbay neighborhood got a pretty good demonstration of what the global supply chain looks like when you try to make it work backwards.
The first Monday of the year marks the traditional start of the holiday return season, which this year is set to break records for returned purchases – and by late afternoon the line of UPS customers carrying boxes has almost faded away.
“Oh my god – wow,” said Erin Metzger, half a dozen returns in hand, as she watched the crowds and towers of Jenga-like outgoing packages behind the counter. “I was not expecting that at all.”
“It comes in waves,” said employee Rebecca Yazzie. “It’ll be quiet for a while, then we’ll have a ton of people at a time. “
Those waves were also being felt across town at Sip and Ship, a coffee and letterbox service combo in Greenwood, where vacation returns are already 20-25% ahead of last year. It’s just “for now,” owner Diana Naramore warned as she stood next to an 8-foot stack of US Postal Service returns. “I mean, we’re just getting started.”
While January has always been comeback season, COVID-19 has oversized the trend. Of the $ 222 billion spent on online vacation shopping this season, 30%, or nearly $ 67 billion, will be returned, according to CBRE, a commercial real estate company that also focuses on retail logistics. That’s an increase of 13% from 2020 and 40% from 2019.
This additional burden is causing friction for shippers, many of whom were already struggling with staff shortages amid the pandemic.
It also puts pressure on retailers, especially small physical stores that have come online to survive COVID but often cannot afford the generous return policies popularized by mega-players like Amazon and Walmart.
“If we pay all the shipping costs and then have to pay for this item to be returned, then we have to pay extra to send in a new item … it’s not sustainable,” says Brittney Geleynse of Clover Toys at Ballard, who like many small retailers had to review their returns policy as their internet sales flourished.
In some ways, this year’s surge in returns is a story of the untimely arrival of omicron, which has driven many holiday shoppers away from brick-and-mortar retail to e-commerce, experts say.
But it’s also a story of how consumers are now using e-commerce to hedge their bets.
Many holiday shoppers, fearing supply chain shortages, have intentionally overbought rather than risk not having gifts on time, according to an Oracle Retail survey. It almost stalled higher yields this season. “Everyone who’s bought online this year expects to return at least three things,” said Chris McDonald, UPS business development manager for the Seattle area, citing industry data.
But even before the holidays, consumers returned online purchases two to three times more often than in-person purchases, according to industry data. This is in part because shopping online is more likely to be unsuitable or unsatisfactory for shoppers.
But it’s also because some retailers have made online returns so easy that consumers find overbought a perfectly acceptable way to sample products.
In addition to free or nearly free shipping, many large retailers have contracts with UPS and FedEx and others to repackage customer returns.
Roger Low, owner of the Interbay UPS Store, says many customers arrive with returns in plastic bags or nothing; Last week, someone dropped off a shirt, which a staff member dutifully folded, wrapped and placed in a trash can.
Incentives like these have led to some excesses. After last summer’s heat wave, Seattle-area shoppers returned “nearly 30” air conditioners to the Interbay store alone, Low said. Buyers have also attempted to return fully assembled electric bikes, sales of which have skyrocketed during the pandemic. “The driver will show up and there will be just, like, ‘Here’s a bike, you have to take this bike,’” McDonald said of UPS.
But mostly, the easy returns have encouraged what retail analysts call “bracketing” – buying multiples of an item of different sizes or styles and returning what doesn’t. does not work.
Bracketing was a thing long before COVID, but it appears to have jumped during the pandemic as shoppers avoid the risk of making purchases in person. Low regularly sees customers returning multiples of the same swimsuit, for example, or “six pairs of baby shoes of different colors or sizes.”
Whether supercharged returns survive the pandemic is unclear. While buyers love convenience, these commodity providers have mixed feelings.
Drop-off points charge a nominal handling fee from shippers – Sip and Ship, for example, receives 50 cents for each UPS and FedEx return, but nothing for USPS. Yet while this rarely covers overtime or insurance, many are reluctant to charge extra for a service that many consumers now seem to see as a constitutional right.
“Most people have gotten used to it, but it’s amazing how many people are going very, very dollar-dollar,” said Sabrina Rinderle, owner of Queen Anne Dispatch, of the charges that courier services / gift shops have started charging for USPS packages.
The biggest setback, paradoxically, may come from retailers. This year, they will lose $ 33 per returned item, up 59% from last year, according to an estimate from Optoro, an expert in so-called reverse logistics.
This is partly because many returns are reduced and sold in secondary markets; but it also reflects the ineffectiveness of attempts to push products back up the supply chain: e-commerce returns typically require more work and space than original e-commerce shipments, according to CBRE.
“The supply chain, in general, was not designed to go backwards,” says John Morris, who heads CBRE’s logistics services line.
This is one of the reasons some retailers simply cancel lower value returns. “This year for the first time… I called for the return label and they said, ‘Keep it,’” said Amy Doerzbacher, who was dropping off a return at Sip and Ship.
Other returns are simply rejected: Around 2.9 million tonnes of returns went to landfill in 2020, according to Optoro, and that number is expected to increase this year, adds Morris of CRBE.
Some industry experts believe retailers will have no choice but to try to weaken the referral business model – for example, by encouraging customers to bring e-commerce returns to physical retail locations. Some UPS Store officials say some large retailers are already selectively increasing return shipping costs for “serial turners”.
Some small retailers, on the other hand, are taking a more proactive approach – trying to sell things that customers won’t want to return in the first place, but also carefully setting expectations for returns.
If a product isn’t right for you, “we’ll work with you,” said Devynn Patterson of Marakesh Leather, a Seattle-based company whose online sales fell from 5% to about 35% of its total during the pandemic. “But we’re not in a position where we can just allow people to wear merch and decide they don’t like it and give it back.”
“We are doing everything we can to stay competitive,” Patterson added. But “we’re trying to make it clear that, ‘Hey, we’re a small family business.’ ”