Holiday Returns Already Are Flooding Parcel Networks

Consumers aren’t waiting until after the holidays to ship goods back

By Erica E. Phillips | Dec 20, 2018

As online retailers ship out loads of goods this season, parcel carriers already are lugging many of those purchases back on the reverse trip.

Of the 800 million packages United Parcel Service Inc. expects to deliver this holiday season, more than 24 million in December alone will be shipments heading back to the sender. UPS estimated Wednesday would be the highest volume day for returns, with shipments reaching 1.5 million—even more than the projected postholiday peak of 1.3 million on Jan. 3.

The shift marks an escalation of a trend that has grown as part of the e-commerce explosion, triggering a boom in boxes flowing through distribution channels and a growing arms race in delivery services.

Online commerce is also a two-way street, said Kathleen Marran, UPS’s vice president of marketing in the U.S. “With four weeks between Thanksgiving and Christmas this year, that allows people to bring things home, try them out and decide if they want to do something different,” she said.

Roughly a third of this season’s $123 billion in estimated online sales are expected to be returned, according to B-Stock Solutions, which runs online liquidation sites for major retailers.

That volume is expected to increase in the coming years as online retailers increasingly treat the ability to return goods as a fundamental part of their pitch to customers. By 2020, annual e-commerce returns are expected to top $550 billion, according to Happy Returns, a company that accepts in-person returns on behalf of retailers at kiosks in malls and stores around the country. That is up from $350 billion in 2017.

Shoppers increasingly demand simple and free returns, analysts say, and in some cases they will choose one retailer over another based on the returns policy.

The rise of rental companies offering high-end apparel, shoes, handbags and jewelry for short-term use adds to the volume of return shipping.

Several logistics startups have cropped up to help retailers handle the deluge of return shipments.

Technology company Optoro Inc. helps many retailers manage and process returned items. Software companies goTRG and Smarter Sorting use scanning technology to assess the quality of returned items and determine whether they should be resold, refurbished or passed along to a reseller.

Real-estate brokerage CBRE Inc. estimates the supply chain for reverse logistics, as the business is known, can require as much as 20% more space than what is required for outbound shipments. With warehouse space already at a premium because of online fulfillment operations, that means extra costs for retailers.

Shipping costs and lost revenue from disposal or discounted resales of returned goods also cost retailers millions annually.

Still, facilitating simple, two-way e-commerce is critical to remain competitive, David Egan, head of industrial and logistics research at real-estate firm CBRE, said in a statement.

“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,” he said.

Write to Erica E. Phillips at erica.phillips@wsj.com

Article was originally published here.