February 21, 2018
Following in the wake of the strong holiday sales season is a relatively new phenomenon that is creating challenges for logistics operations. Sales growth is also introducing more returns into the secondary retail market. Experts believe this surge is a result of e-commerce consumers being more likely to return items they purchased online.
Typically, the most common returns include clothing and apparel items, with electronics, beauty products and sports or outdoor gear among the next most returned. Retailers seek to put those returns back into the marketplace through resellers, often at steep discounts. An example that reflects the market dynamics at play were a batch of washing machines and dryers recently returned to Best Buy that were being offered for resale at a 68% discount on an online auction site.
The busiest months for reverse supply chain logistics operations are January and February. And it is a segment that is significantly expanding in step with e-commerce growth. Since 2008, online auction sales have grown 66%. Post-retail sales, encompassing returns and overstocked items, totaled $554 billion in 2016, and have been growing roughly 7.5% a year, according to Colorado State University’s Zac Rogers, an operations and supply chain professor. This year, experts estimate that roughly $90 billion in merchandise may traverse through reverse distribution channels.
Retailers place roughly 50% of holiday season returns back on the shelf for sale at a discount. The challenge for the logistics sector is to find efficient ways to handle the other 50% of returns in what can only be described as a complicated process. Getting products back out into a network of resellers is not easy. That’s because it spans a wide range of secondary sellers including outlet stores, online auctions, flea markets and salvage dealers. During the peak return season, retailers may hire a second shift to process the items and sometimes they simply wash their hands and send items to a landfill.
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