Growing Recognition of the Environmental Costs of Massive Levels of On-Line Returns

Customer returns from ecommerce are a huge operational and financial drain on any company selling to consumers on-line.

As we reported last year, many large etailers including Amazon and Walmart, tell some customers requesting a return to just keep the merchandise and the credit.

Supply Chain Digest Says...   In 2020, Amazon started a program for some sellers called Grade and Resell for returns. What do you say? Click here to send us your comments   Click here to see reader feedback

The National Retail Federation (NRF) compiles data on retail returns, and says a record $761 billion of merchandise was returned to retailers in 2021. That includes both traditional returns from goods bought in store, but it seems obvious ecommerce has served to raise the level of returns, which happen at a higher rate with on-line purchases.

Across all channels, US customers return about 16% of purchases last year, up from 10% in 2020 and more than 56% from 2020. The rate of returns for on-line purchases was 20.8%, up from 18.1% last year.

By way of comparison, CNBC.com recently noted that the $761 billion dollars’ worth returns is more than the $741 billion the US spent on national defense last year.

But lately, the discussion has moved beyond just the financial cost of returns – there is a steep and rising environmental cost too.

According to reverse logistics firm Optoro’s data, retail returns created 16 million metric tons of carbon emissions last year from being transported usually multiple times, and 5.8 billion pounds of landfill waste.

Because in many cases the returned merchandise cannot be resold, even through discount channels, a lot of it is simply thrown in the dumpster.

Amazon says it has a goal of “working towards a goal of zero product disposal,” but that would seem a very tall task.

Amazon, in fact, recently told CNBC that most of its returns are sold again, through multiple channels new and used, through returns to the marketplace seller or product supplier, or by donations to various organizations that can use them.

(See More Below)

Part of the problem, of course, is that many etailers led by Amazon have worked to make returns extremely easy for consumers, to reduce the risk of on-line purchases. Even to the extent that with Amazon, a customer can return purchases at at Kohl’s, UPS, and some Whole Foods stores without even a box or label.

But returns for Amazon involves billions of dollars in freight and merchandise costs, with the impact on the planet noted above on top of that.

As part of a multi-pronged attack, in 2019 Amazon started a donation program that allows its US marketplace sellers to automatically donate excess and returned goods to a network of 100,000 local charities through a partnership with nonprofit network Good360.

Good360 works with local charities so they can pick-up the returns at more than 230 Amazon facilities, so Amazon doesn’t have to ship them off.

In 2020, Amazon started a program for some sellers called Grade and Resell for returns. With this option, Amazon evaluates the returned item and gives it a grade, such as Like New, Very Good, Good or Acceptable, and then resells it on special sections of its own web site.

With selling to outlet channels usually recovering just pennies on the dollar, this type of direct resale of returned goods might raise that to maybe 30%.

Will these and other programs really make a dent in return volumes and financial costs of massive ecommerce returns?

Unfortunately, it seems unlikely.

Any reaction to the on-line returns crisis? Let us know your thoughts at the Feedback section below.