Holiday Gift Returns to Top $66 Billion, Putting More Stress on U.S. Supply Chain

Holiday Gift Returns to Top $66 Billion, Putting More Stress on U.S. Supply Chain

| By Michael Gerrity | December 17, 2021 8:30 AM ET

2021 online gift returns estimated to be a 46% increase over last five-year average

According to a new report from CBRE in partnership with Optoro, more stress for retailers and the already strained supply chain may be ahead as e-commerce returns are expected to start earlier and sustain high volumes this holiday season.

According to the report, e-commerce returns this holiday season could total as much as $66.7B, a 45.6 percent increase over the five-year average. The forecast is based on National Retail Federation data, which estimates online holiday purchases (November and December sales) will reach $222.3B.

Adding to volume challenges, this year retailers may face an elongated return season, as earlier buying may mean earlier returns if shoppers decide to return gifts before giving them. According to Optoro, 41% of consumers plan on shopping earlier this year in an attempt to avoid product scarcity and supply chain delays.

And the cost to process all the returns is going up: A $50 item could amount to 66% of its sale price on average--up from 59% last year--when factoring in the costs of customer care, transportation, processing, discount loss and liquidation. High-value electronics, such as laptops, tablets and cell phones will see the highest reverse logistics costs in terms of total dollar cost per unit, according to Optoro.

"E-commerce holiday gift returns have always been a significant challenge for retailers, but this year will be particularly difficult," said John Morris, Executive Managing Director and Industrial & Logistics Leader. "With the growth of e-commerce during the pandemic and the increasing costs across a bruised supply chain, reverse logistics will be tougher and more costly than ever before for retailers this holiday season."

Additionally, returns (reverse logistics) require up to 20 percent more space and labor capacity than the original order fulfillment process (forward logistics). This creates additional challenges given that industrial space is already historically tight, with third-quarter U.S. vacancy rates at a record low of 3.6 percent, according to CBRE.

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