CSCMP's Supply Chain Quarterly
October 19, 2018
Forward Thinking

Holiday returns volumes reach new high, UPS says

The surge in e-commerce returns has pushed retailers and carriers to cut reverse logistics costs.

E-commerce returns were on track to reach a new high following the 2016 holiday season, pushing retailers and carriers to search for ways to control the soaring costs of reverse logistics, according to figures from UPS Inc.

An unprecedented volume of online sales drove another record year for returns, with holiday shoppers projected to return more than 5.8 million packages via UPS during the first full week of January 2017, including 1.3 million packages on Jan. 5 alone, the Atlanta-based transport and logistics giant predicted. The company won't disclose actual peak-season volumes until its fourth-quarter 2016 earnings announcement on Jan. 31.

The rising volume of returns presents a challenge for retailers as well as carriers, since e-commerce sites need to strike a balance between reducing the cost of handling returns and meeting consumer expectations for an easy shopping experience.

"Online shoppers want the same level of choice, control, and convenience making their returns as they do making their purchases," UPS Chief Marketing Officer Teresa Finley said in a statement. "While returns can't be eliminated, an easy-to-use returns experience should be one of several retail strategies to enhance customer loyalty and manage the cost of returns processing."

Over the past five years, retailers have taken significant strides to improve the customer service experience of their returns programs, according to UPS' most recent "Pulse of the Online Shopper" study. Comparing conditions between 2012 and 2016, consumers reported fewer issues paying for returns shipping (decreasing from 66 percent to 50 percent), paying restocking fees (decreasing from 43 percent to 27 percent), or experiencing a delay in receiving credits or refunds (decreasing from 41 percent to 27 percent), that analysis shows.

E-commerce companies achieved those improvements by meeting online consumers' demands for an efficient returns experience, UPS said. Those steps include: free returns shipping, a hassle-free returns policy, easy-to-print return labels, timely refunds, and packing a return label in the box.

Still, most companies have a long way to go in holding down the cost of returns, said Ken Chrisman, president of product care for Charlotte, N.C.-based packaging giant Sealed Air Corp.

"If you're an e-commerce company, there are four primary costs: labor, shipping, damage or returns, and packaging. Handling those costs determines whether you'll be profitable or not," Chrisman said in a phone interview. "How do most companies handle that efficiently? The answer is, most don't."

The simple step of packing a return label with each original shipment can make a big difference in handling returns efficiently, Chrisman said. He added, however, that there is no one-size-fits-all approach. For example, pharmaceutical companies may have extremely low returns rates because regulations require extreme precision in handling and tracking medicines, he said. By contrast, apparel industry firms have some of the highest return rates in the business, since buyers return items that don't fit or they order a range of sizes purposely and keep only the one that fits best.

Companies with high return rates can reduce costs with reusable packaging, Chrisman said. That is crucial, because carriers now charge by dimensional weight standards that could run up a large fee if consumers pack their own return parcels using oversized boxes, he said.

To encourage consumers to reuse original packaging, Sealed Air recommends that retailers automatically insert a return label with the original shipment, include peel-off adhesive backing on that label in case consumers don't have packing tape, and ship re-sealable packing envelopes for smaller items so customers can return the product in the original parcel.

Ben Ames is Editor at Large and a Senior Editor at Supply Chain Quarterly’s sister publication, DC Velocity.

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