This article was originally published in The Interline’s second Sustainability Report. To read other opinion pieces, exclusive editorials, and detailed profiles and interviews with key vendors, download the full Sustainability Report 2024 completely free of charge and ungated.
As online shopping continues to become easier, faster, and more ubiquitous, customers have come to expect that convenient (often free) returns are an essential part of the e-commerce experience. Amazon reinforces this expectation by allowing customers to get instant refunds at return locations quickly, no questions asked, and for free. Meanwhile, brands and retailers have been grappling with the complex issue of returns in their digital channels. the volume of online sales has been promising, but the hidden costs of returns eat into profitability. The real challenge lies in prioritizing the time, resources, and energy needed to improve the returns process. Many companies struggle to allocate focus to this area, despite its significant impact on their bottom line and customer satisfaction. This hesitation to address the returns problem head-on stems not from complacency, but from the daunting nature of overhauling established systems and competing priorities within retail organizations.
The act of buying online with the assurance of easy returns has become deeply rooted in modern e-commerce. It’s common for shoppers to order various sizes or styles, planning to return what doesn’t fit or suit them perfectly, without a second thought. This is what’s called “bracket buying.” Retailers who put more friction between transactions and returns face the reality that consumers who want that flexibility will often shop elsewhere.
But this level of convenience comes with a less-talked-about, but spiraling environmental price tag that the industry now needs to reckon with. I know this because, in my time working on improving online returns and reverse logistics, I have seen firsthand how easily high return rates can undermine a brand’s sustainability efforts and exacerbate the growing climate crisis. However, the growing scrutiny on these issues presents an opportunity for brands to take action that benefits both their bottom line and the environment. By implementing efficient reverse logistics and sustainable return processes, retailers can reduce their ecological footprint while also improving operational efficiency. This approach addresses environmental concerns and can positively affect businesses, customers, and the planet. Ultimately, sustainability and profitability in retail are not mutually exclusive; they can work in tandem to create a more responsible and thriving industry.
The shape and scope of the problem
According to insider estimates, 20-30% of online purchases are returned, compared to 9% of items purchased in physical stores. While some retailers encourage shoppers to return online purchases to brick-and-mortar stores, most online returns come back to the retailer via traditional reverse logistics (post and courier), directly impacting the carbon footprint of the company receiving the returns. Estimates that up to 24 million metric tons of CO2 emissions can be attributed to industry-wide e-commerce returns each year, according to a recent study from Optoro.
The emissions associated with returns are particularly alarming when one considers that many items, especially apparel, travel thousands of miles before reaching a customer. When those items are sent back to the original distribution center, the carbon footprint of the product journey can double or even triple.
Packaging waste is another environmental consequence of returns. When a product is returned, it often involves additional boxes, plastic wraps, tape, labels, and packing materials—most of which are single-use and inevitably add to the volume of waste already generated by the original outbound shipment. In many cases, customers repackage returned goods. So the goods are in good shape when received for a refund, which inevitably adds to the volume of waste already generated by the original outbound shipment.
One of the more difficult impacts to appreciate is the eventual journey of returned products. Shoppers tend to assume that returned items go back on the shelf (physical or virtual) to be resold…and certainly, this is what we should all hope happens. However, the reality is different. In many instances, returned goods are deemed unsellable due to damage during shipping, the seasonality of the item, or if the cost of inspection and repackaging ends up outweighing their resale value. These products are frequently discarded or sent to liquidation, and many eventually end up in landfills.
CleanHub reports that companies sent over 9.5 billion pounds of returned products straight to landfills in 2022 alone, saving the labor required to bring them back into circulation, but paying a different price in emissions and waste.
Evolving consumer attitudes
Consumer behavior also plays a key role in the return lifecycle. Increasingly, shoppers express a desire to support sustainable brands and make eco-friendly choices. McKinsey & Company reports that 66% of customers want to shop more sustainably. However, despite their best intentions, shopper return habits often tell a different story. While research continues to suggest consumers are increasingly aware of sustainability issues, the convenience of free and easy returns creates a disconnect between their values and actions.
For brands and retailers, this creates the illusion that there’s a tension that requires reconciliation. As more and more companies fall under the scope of disclosure requirements and regulations that mandate transparency and extended-lifecycle impact modeling, those same companies will seek every possible avenue to cut their emissions. But at the same time, they’ll need to shore up profitability – and the prevailing belief is that profit is at odds with sustainability, especially if customers stop purchasing from them because they begin charging for returns or restricting the convenience of sending items back in other ways.
The only way to move the needle here is for brands and retailers to realize this isn’t an either-or situation. Optimizing return transportation lines, keeping products local for resell after being returned, consolidating shipments, and validating returns early in the return journey improve customer convenience while reducing retailers’ costs and emissions. From what I see as CEO of ReturnBear, retailers who delve into the possibilities and take the time to invest in change can gain at least 30-50% on return costs while cutting emissions by as much as 40%.
Innovative solutions in reverse logistics
The fact remains that brands need to sell their products and want to expand to new markets, where the frontiers of pricing, fit, color, and more will be continually tested. The industry will not be able to accomplish this without keeping the gates open for returns.
Innovative solutions already exist so that retailers can have it all, and technology has an important role to play in several different areas.
Some solutions help brands tap into the re-commerce movement by listing returns on resale marketplaces so they can find new homes instead of going to landfills. Others provide software that enables third-party logistics providers (3PLs) and warehouses to process returns as effectively as they manage their outbound shipments, and to get items back in stock and selling again without involving the brand directly. Besides reducing product waste, brands can extract more revenue from their returns by selling them again, even at a reduced price, through partnership strategies, which will plug into brands’ resourcing and stock-keeping systems.
Rethinking packaging design is another overlooked way brands can minimize waste. Companies innovating in the packaging space are emerging, developing branded packaging options that can be recovered from customers and reused multiple times, instead of defaulting to single-use materials. This can help reduce the materials used in each transaction, both for the initial sale and the return and create a unique opportunity to connect a brand’s identity to its packaging in novel ways that are better for the planet!
At ReturnBear, our approach has been to provide services across a returned product’s entire journey to compress the cost, time, and distance traveled by that return. Our approach provides reverse logistics services for brands in markets worldwide where the brand doesn’t have local operations of their own. We can receive returns locally, process them quickly for customers to get fast refunds, reduce fraud by verifying item accuracy and quality, and then consolidate returns before shipping them back to our brand partners. Minimizing shipments through consolidation has a particularly positive effect on carbon emission reduction, and reducing the need for cross border return shipments by keeping products local can improve emissions by as much as 40%. This model also offers brands’ improved customer experience (from faster return processing) and increased profitability by lowering return-related costs.
The role of technology and data
Strategically deploying technology and data analytics can also play an important role in mitigating the environmental impact of e-commerce returns. Many merchants don’t know the true impact of returns on their business, and you can optimize what you can’t measure. Data can help on many fronts, from route optimization to calibrating product mixes, to reduce the incidence of returns in the first place.
For example, if a brand stays on top of its return data thanks to a machine learning model surfacing relevant insights at the right time, then predictive analytics can be used to reduce returns before they even happen. This might include providing more accurate product descriptions and imagery, publishing better sizing guides, or piloting virtual try-on technology for apparel, all of which can help customers make more informed decisions and reduce the likelihood of returns.
As we’re already seeing, AI and machine learning can also assist in a host of ways. AI-based chatbots for initiating returns are starting to make their way onto the scene. And machine learning can route returned goods to more optimized locations or processing centers, reducing the distance traveled and the associated emissions. Smart inventory management, powered by a brand’s own data, can ensure that returned items are inspected, repackaged, and re-shelved more quickly, reducing waste and improving profitability. Pairing this with the capabilities of partners who can execute the mechanics of reverse logistics more quickly will help dent both the cost and the footprint of those returns.
Policy and industry initiatives
As important as voluntary brand action and shifting consumer behavior will be, more than these forces will be needed if we’re to move the needle.
Industry-wide initiatives and government policies will still be required to promote and then mandate sustainable commerce practices. Some governments are already exploring regulations limiting the environmental cost of returns, such as placing stricter guidelines on how products can be disposed of (as is the case in extended producer responsibility regions) or requiring transparency around return-related emissions.
Industry-led initiatives are also emerging to promote more sustainable returns. These include collaborations between retailers, logistics companies, and sustainability organizations to develop new best practices and share innovations. If we combine our efforts, build shared networks, and embrace the tools and technology to optimize a given return’s lifecycle, we stand the best possible chance of setting new standards for the entire e-commerce ecosystem and operating profitable businesses simultaneously!
Conclusion
For the foreseeable future, returns will be an inevitable byproduct of sales growth in e-commerce. Convenient and cost-effective returns are a modern consumer expectation and a key motivator for shoppers to make purchase decisions, which don’t need to be at odds with brand profitability and sustainability. Simply put, if we fail to meet demand and fail to implement suitable solutions for all stakeholders, the current free and easy returns model will become more unsustainable than it already is.
Amazon’s free, instant refund return locations are setting new global consumer expectations, leaving brands scrambling to adapt. By recognizing the impact of returns on transportation emissions, packaging waste, and product disposal, companies must swiftly implement changes to optimize reverse logistics. Crucially, brands need to focus on reducing returns through improved design, development, sizing, and production strategies. Those who fail to address these challenges risk becoming obsolete in the rapidly evolving retail landscape. To remain competitive, brands must act now to meet rising consumer demands and environmental concerns, or risk becoming retail dinosaurs in an increasingly demanding market.
Consumers also have an opportunity today to align their return habits with their sustainability values. Educating them and providing services that they can embrace as convenient and better for the environment will be a key brand responsibility that helps balance the scales.
Perhaps the time is upon us to create and elevate the chief return officer role, which would provide focus, visibility, and control across the return lifecycle and complex chains of reverse logistics. With that kind of dedicated oversight, the right partnerships, and a focus on excellence after a product has been sold, we can create a future where the convenience of online shopping coexists with a commitment to protecting the planet.
