Logistics companies look at sustainable returns

The ghost of empty shelves and delayed presents looming over consumers’ heads has pushed some to purchase gifts well ahead of Christmas 2021. As reported by Mastercard in its Spending Pulse report, in the US this has resulted in a year-on-year (y-o-y) growth in retail sales by 8.5% during the holiday period of November 1 through December 24, 2021. e-commerce sales rose by 11.0%. Apparel purchases were, unsurprisingly, the leading category.

Although this certainly is good news in terms of e-commerce growth, the picture is perhaps less rosy than it would appear. Logistics technology company Optoro, which helps to manage and resell returned merchandise, estimates that $120bn (€106bn) of goods sold from Thanksgiving 2021 through the end of January 2022 will be returned.

When looking at Europe, Al Gerrie, chief executive of online return software ZigZag Global, estimates that returns for womenswear usually range between 30.0% and 50.0% in the UK. In mainland Europe, Germany sees rates of over 50.0%, with most people buying through credit cards rather than with disposable income.

Fast fashion has one of the highest rates of returns due to the practice called bracketing, where customers buy more than one size of a certain item to try and find the best fit and then return the unwanted ones. Forrester and eMarketer estimate the current level of e-commerce returns to be around 20.0%, whereas the proportion of those carried out in bricks-and-mortar stores is between 8-10.0%.

In line with the increasing rates of online shopping and consequentially returns, a rising environmental concern is not only the high levels of emissions generated by shipments, but also packaging waste across worldwide markets that returns also create. Latest available data from Eurostat indicates the level of packaging waste generated across EU-27 states stood at 177.4 kgs per inhabitant in the EU as of 2019 and was composed mostly of card and cardboards, while growing at an annualised rate of 2.0%. The Guardian reports that UK households have gathered around 135m cardboard boxes just from March 2020 to June 2021 with a 33.0% y-o-y increase in shipment in 2020 to 5bn parcels. In the US, in the first nine months of 2021, box shipments were up 3.9% y-o-y from 2020, equalling around 40bn boxes shipped, according to the Fibre Box Association.

After pledging to make their shipment carbon neutral, logistics companies are trying to address these environmental concerns too, often with help from third parties. In the US, since November 2020, return logistics company Narvar collaborated with UPS to facilitate boxless returns by providing consumers with a QR code to present at the UPS drop-off location. UPS takes the item, box-free and label-free, and instead use a recyclable polybag to send the item back to the merchant through the closest distribution centre, saving shipping costs for the retailer, time for the customer, and reducing packaging waste. Amazon customers can also use this service. FedEx has been doing something similar through its partnership with return solution provider Happy Returns.

More recently in October 2021, the company has also announced the completion of the rollout of its FedEx Reusable Pak, aimed at offering a more sustainable choice for e-commerce shipments in Europe and in line with its aim of achieving carbon neutral operations globally by 2040. Suitable for shipments of up to 2.5 kgs, the Pak is resealable to facilitate returns without added waste. The products were made available to FedEx Express customers across Europe in July 2021 and are offered as complimentary packaging to new and existing customers.

Currently, according to a Returns Management Survey carried out by McKinsey prior to the pandemic, managing returns is not among the top five priorities for a third of retailers—and a quarter of the retailers surveyed don’t do so efficiently and effectively. However, as of January 2022, costs of returns for UK retailers are estimated at around £20 per parcel, with prices up 59.0% y-o-y due to labour and warehousing space shortage that disrupted supply chains and impacted import prices earlier in 2021. This implies that reverse logistics need to be looked at by retailers for longer-term gains. Technology-aided reverse logistics specialised partnership might contribute not only to achieve cost saving but also to make steps towards greener e-commerce return strategies.

Source: Transport Intelligence, January 6, 2022

Author: Caterina Ciccone