Woman shopping online.
Oscar Wong | Moment | beautiful pictures
Free returns are certainly not free for retailers.
In fact, the cost of handling returns will increase this holiday season, according to logistics industry forecasts, especially in light of rising inflation, labor shortages and Covid precautions.
Average holiday yield will cost retailers two thirds of the original price New data from commercial real estate firm CBRE and reimbursement technology company Optoro shows items when factoring in labor, transportation and warehousing costs.
CNBC got an early look at CBRE-Optoro’s annual report, which showed a 7% increase in cost of profit, also known as reverse logistics – with electronics like computers, tablets and Mobile devices cost 15 times more to return than clothing. , as workers must delete personal data.
Tobin Moore, founder and CEO of Optoro, told CNBC: “It’s growing because you have a lot of other things connected to a wired network or connected to the internet. “All watches now have sensors. Now clothes and shoes also have sensors. I see that’s something that’s going to increase.”
National Retail Federation estimate Online sales in November and December will grow about 13% to more than $222 billion. The CBRE report predicts that $66.7 billion of those online sales will turn into profits — also 13% higher than the same period last year and nearly 46% higher than the five-year average. . About 30% of e-commerce sales are returned compared to 10% of brick-and-mortar sales, according to CBRE.
The higher profit figures come from large retailers like Walmart, Target and Best buy are facing increasing logistical costs to make those sales in the first place. CBRE estimates that logistics now account for 12% of revenue for these large retailers with growing e-commerce businesses, compared with just 6% for more brick-and-mortar retailers.
John Morris, CBRE’s head of logistics and industrials in the Americas, told CNBC that early procurement due to supply chain concerns has also led to an earlier return to profits. “There’s no packing scale. There’s no moving scale. There’s no freight consolidation. All that stuff goes back through the supply chain,” he said.
Wages for logistics workers have increased by 5% during the pandemic, and retailers need 20% more warehouse space to process returns, CBRE reports, according to CBRE. “It’s more margin compression in a business with escrow challenges,” says Morris. “I think you’ll see new models where customers have the opportunity to gift certain things or be encouraged to return to the store. Because the impact on profitability is uncontrollable.”
CBRE and Optoro say profitability also continues to be an environmental issue as reverse supply chains require more packaging and shipping. “Our estimate is that 5.8 billion tonnes of return packaging will end up in a landfill after this holiday season. Recalls from this holiday season will also generate around 16 million,” Morris said. tons of carbon dioxide”.
