Five billion pounds of holiday gifts will end up being thrown in the trash, according to tech company Optoro that helps big retailers manage returns.
The returns are not only unfriendly for the environment but they are very costly for retailers. Each year, approximately $380 billion in goods are returned by consumers, of which $90 billion is processed at the time of the holiday, says Optoro.
Only 50% of the returns go back on the shelves, estimates Optoro. The remainder, due to things such as opened boxes or damages head in a different direction.
About 25% of the items are sent back to the manufacturer, while others will be sent to secondary retailers. However, many of the returns are sold for just pennies on the dollar to discounters and liquidators prior to finding a place with regional wholesalers, who then send the goods to dollar stores, pawn shops and even out of the U.S. In the end, it becomes an expensive process that retailers must take.
As soon as a product is brought back to the store, the retailer must cover the cost for assessing it and repackaging it.
An item considered “like new” or an article of clothing might be resold at full cost. However, most of the returns are damaged or used. A recent survey of retail found that less than 50% of all goods are able to be resold at their full cost.
In addition, if it costs the retailer less to throw the item out that has been returned instead of attempting to resell it, then the item is put in the trash.
The returns process is even more complicated due to the increase of shopping online. It is estimated by the National Retail Federation that between 15% and 30% of items purchases online are returned which equal about $32 billion.
Many retailers focused on building the technology and the logistics to handle sales online ignored some problems that were created from growth in e-commerce, said the Optoro CEO and co-founder Tobin Moore.
Retailers have been hit hard in the pocketbook from the changes in consumers’ habits and their expectations.
As people become more comfortable purchasing clothing online and returning ones that are not the right size, the volume of online sales returns surges, creating more transportation problems, said the CEO.
It is positive on one side for retailers that consumers are buying goods online knowing a risk is involved, but for retailers it is not the easiest thing to resolve when returns start piling up.