CBRE report examines intersection of holiday e-commerce and reverse logistics activity

The importance of having cohesive and efficient reverse logistics processes for retailers is far from overlooked. That is especially true at this time of year, when holiday shopping is moving along at a very brisk clip, which tends to be the case.

That said, reverse logistics processes will be looked to more than ever for retail shippers, with industrial real estate firm CBRE calculating that the total value of returned goods purchased online during the 2016 holiday season will be between $14 billion to almost $29 billion (out of total holiday e-commerce sales of $95 billion). That was a key takeaway from the firm’s recently report, entitled: “Holiday Stress: E-commerce and the Rapidly Rising Rate of Return.”

The report is replete with various data points highlighting how reverse logistics, coupled with increasing e-commerce activity, continue to gain traction, including:

• retail sales comprising 8 percent of total sales, while e-commerce return rates are much higher at 15 percent to 30 percent, depending on product type;
• citing eMarketer data, 2016 holiday  e-commerce sales are projected to rise 17 percent to $95 billion and could potentially result in $29 billion worth of returns; and
• it is estimated that returns, either sold at discount or disposed of, cost retailers 4.4 percent of total revenue per year

How things end up shaking out for holiday season reverse logistics is difficult to predict, according to Joe Dunlap, CBRE Managing Director of Supply Chain Services.

“It is infinitely harder knowing what’s coming back, when it’s coming back, how it’s coming back, where it’s coming back, and what condition it will be in when it arrives,” he explained. “Those kind of attributes are tremendously important to be able to handle things efficiently in terms of costs and speed.”

And to quickly position items or, for example, route a return back to a retail store to potentially sell it more quickly is one of the most important things retail shippers have to deal with for reverse logistics, especially for e-commerce sales, he said.

Dunlap says there is a fair amount of seasonality related to holiday sales e-commerce volume, in terms of how many companies build their supply chain businesses based on 11.5 months of the year, the flexible resources that a third-party provides to supplement their needs during this short period of the year has tremendous value.

“It is not something they want to build a building for two or four weeks of the year, when they are making investments for 11.5 months of the year,” he said. “This is where 3PLs tend to provide their flexibility in some cases,” he said.

In other cases, where there are year-round reverse logistics for things like ink cartridges and printers or electronics in general, there are a number of specialty or warranty service items, where an item comes back, gets repaired and maybe gets sold as a refurbished item. Year-round reverse logistics are a different animal with some consistency to plan for and specialty 3PLs that work with reverse logistics year round as opposed to that flex spike for 2-4 weeks of the year.”

When asked what the reverse logistics landscape may look like in the future, Dunlap said that one thing to follow is how retailers have become much more data-intensive in terms of understanding what consumers wants, needs, demands, and personal preferences are.

“They are tracking us in a way which is oblivious to us but meaningful to them so they can better position the right product at the right place at the right time in the right color, among others, and hopefully are getting better at minimizing, or reducing, reverse logistics as a percentage of sales,” he said. “The idea that we are getting smarter as retailers as data scientists project better, position better to order and make the right product…to make the supply chain more efficient is spot on to reduce reverse logistics volume.”