Handling Returns Becomes a Logistical Problem for Online Retailers


    Holiday sales in 2018 were estimated to be $719 billion and each year, this number grows as ordering with just one click is very convenient.

    During the peak of the holiday season, UPS, FedEx, and the U.S. Postal Service handled 72 million packages each day, while the national average is 45 million packages each day. The National Retail Foundation estimates that 11% of all purchases will be returned and shipped back, but this number is much higher for online orders. The cost of returns is estimated to be $3 per package when returned to stores and $6 per package when returned to a distribution center.

    The online platforms for Nordstrom, Macys, and Amazon have relaxed return policies and the estimated value of returns is expected to reach $400 billion, with most returns being e-commerce apparel. A lot of people order two different colors, try the clothes, and return the one that they are not happy with. This is one problem with online ordering. In-store returns are much lower as customers experience the goods in-person and make better purchasing decisions.

    Many more retailers are turning to their logistics providers to handle returns.

    The services provided by logistics centers vary from testing, repairing, or when necessary, disposing of goods.

    Handling returns created new opportunities. One such company created from this new return demand is Boxzooka, operating in New Jersey and handling a million units in 2018 alone. Their primary makeup of returns is 75% apparel and 15% beauty products. They inspect the returns and enter them into their system so that big retailers can see what kind of merchandise is being returned and at what point, providing visibility of their product returns.

    Amazon found a different and more-creative way to handle some of their returns.

    They catalog and sort products so that people can buy from Amazon warehouses at deep discounts. One company called Liquidation.com offers $4,000 worth of goods in auctions, with prices sometimes as low as $200. The company focuses on mainly selling returned products from Amazon to their 3,357,000 registered users and sold $626 million dollars of goods in 2018. Some people even created a new business model, where they buy goods from Liquidation.com and sell them on eBay with high margins. It seems handling this problem became a profit tool for some people and companies.